Financial Reporting Requires That Firms Recognize Product Financing Arrangements as Liabilities

question 2

Multiple Choice

Financial reporting requires that firms recognize product financing arrangements as liabilities if which of the following conditions is met?

• A) The arrangement requires the sponsoring firm to purchase the inventory, substantially identical inventory, or processed goods of which the inventory is a component at specified prices.
• B) The selling or sponsoring firm physically controls the inventory.
• C) The payments made to the other entity cover all acquisition, holding, and financing costs.
• D) Both "t he arrangement requires the sponsoring firm to purchase the inventory, substantially identical inventory, or processed goods of which the inventory is a component at specified prices"  and "t he payments made to the other entity cover all acquisition, holding, and financing costs"  are correct.