If a Company Adopts an Accounts Receivable Factoring Program, and Accounts

question 102

Multiple Choice

If a company adopts an accounts receivable factoring program, and accounts for the factoring as a sale of receivables, which of the following is true in the period the company starts the program (all else equal) ?

• A) The accounts receivable balance will increase.
• B) Cash flow from operations may increase.
• C) A retroactive restatement is necessary due to a change in accounting principle.
• D) The factoring arrangement needs to be with a consolidated entity to qualify for sale accounting.

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Definitions:

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