Accounting Case Study

• For the first provision, if would not preclude sales accounting because it is one of the conditions in 40-18 that clearly states "A requirement to obtain the transferor's permission to sell or pledge that is not to be unreasonably withheld" …. "do not preclude transfer subject to such condition from being accounted for as a sale. The second provision because it is a repurchase of accounts receivable at a fixed price, results in a preclude to sales according to 860-10-40-5-C-1, which states that "An agreement that both entitles and obligates the transferor to repurchase or redeem them before their maturity" is a preclude to sale accounting. Which is stated again in 40-29 "A right to reclaim specific transferred assets precludes sale accounting only if the transferor can exercise the right unilaterally". Which in this case it would be unilaterally. This kind of provision should be used in secured borrowing.

• 40-46 If the transactions do not meet all of the provisions in paragraphs 860-10-40-43 through 40-44, the initial transfer and repurchase financing shall be evaluated as a linked transaction. The linked transaction shall be evaluated to determine whether it meets the requirements