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Loans Receivable and Financing Overview

The document outlines the measurement and impairment of loans receivable, detailing initial and subsequent measurement methods. It discusses various forms of receivable financing, including pledge, assignment, factoring, and discounting, highlighting their differences and implications for ownership and disclosure. Additionally, it addresses the recognition of gains or losses on discounting and factoring, distinguishing between recourse and non-recourse options.

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sanicocyryl07
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13 views2 pages

Loans Receivable and Financing Overview

The document outlines the measurement and impairment of loans receivable, detailing initial and subsequent measurement methods. It discusses various forms of receivable financing, including pledge, assignment, factoring, and discounting, highlighting their differences and implications for ownership and disclosure. Additionally, it addresses the recognition of gains or losses on discounting and factoring, distinguishing between recourse and non-recourse options.

Uploaded by

sanicocyryl07
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

LOANS RECEIVABLE AND RECEIVABLE FINANCING

LOANS RECEIVABLE MEASUREMENT:


o Initial measurement: FACE VALUE + DIRECT ORIGINATION COSTS - ORIGINATION FEE =
INITIAL CARRYING VALUE
o Subsequent measurement: AMORTIZED COST
o Impairment loss = Carrying Amount (Amortized cost + Accrued interest) LESS PV of recoverable amount
(based on ORIGINAL effective rate)

Common forms of receivable financing: Pledge/Hypothecation; Assignment; Factoring; Discounting.


Pledge of AR only requires disclosure.

Pledge of AR VS Assignment of AR
PLEDGE ASSIGNMENT
FORMAL? NO YES
TRANSFER OF RIGHTS? NO YES
TRANSFER OF NO
OWNERSHIP?
AR SERVE AS SECURITY YES (GENERAL) YES (SPECIFIC)
DISCLOSURE AR PLEDGED EQUITY ON ASSIGNED
ACCOUNTS

PLEDGE OF ACCOUNTS ASSIGNMENT OF FACTORING OF ACCOUNTS DISCOUNTING OF NOTES


RECEIVABLES ACCOUNTS RECEIVABLES RECEIVABLES RECEIVABLE
Face value of the Face value (% x XXX Face value (% x face XXX PRINCIPAL XXX
loan XXX face value of AR) value of AR) Total interest (if
Discount (XXX) Commission and Commission and interest bearing) XXX
Charges (XXX) other charges (XXX) other charges (XXX) Maturity value XXX
NET PROCEEDS XXX NET PROCEEDS XXX Factor’s holdback (XXX) Discount (MV x
NET PROCEEDS XXX discount rate x
discount period) (XX)
NET PROCEEDS
XXX
Carrying amount of
NR (including
interest) (XXX)
GAIN OR LOSS
ON
DISCOUNTING XX/(XX)

CA of AR (AR, end Net proceeds XXX *DISCOUNT PERIOD –


balance) XXX Factor’s holdback XXX UNEXPIRED TERM OF THE
CA of Loans Selling price XXX NOTE.
payable (Beg. Bal CA of AR (NRV) (XXX)
less payments) (XXX) GAIN OR LOSS ON
EQUITY ON DISCOUNTING XXX
ASSIGNED
ACCOUNTS XXX
 As to forms of factoring:
o Without recourse (if silent) – transferor no longer liable
o With recourse – transferor guarantees payment in event of default of the debtor.
 As to forms of discounting:
o Without recourse – outright sale. Holder no longer liable in case the maker fails to pay.
o With recourse – holder is held liable in case the maker fails to pay.
 If silent, it is a conditional sale – with contingent liability (DISCLOSURE ONLY)
 Secured borrowing – recognition of a liability
LOANS RECEIVABLE AND RECEIVABLE FINANCING
Is there any GAIN OR LOSS ON DISCOUNTING to be recognized?
Discounting WITH RECOURSE:
 CONDITIONAL SALE YES
 SECURED BORROWING NONE
Factoring:
 WITH RECOURSE NONE
 WITHOUT RECOURSE YES

DISCOUNTING WITHOUT CONDITIONAL SALE SECURED BORROWING


RECOURSE
Cash XXX Cash XXX Cash XXX
Loss on discounting XXX Loss on discounting XXX Interest expense XXX
Notes receivable XXX NR discounted XXX Liability for NR XXX
Discounted
Gain on discounting XXX Gain on discounting XXX Interest income XXX
Interest income XXX Interest income XXX

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