Companies sometimes use accounts receivable as collateral in a secured borrowing or sell them to a factor.

Question:

Companies sometimes use as collateral in a secured borrowing or sell them to a factor. The accounting method for these types of transactions is governed by ASC 860 – Transfers and Servicing, the majority of which derives from SFAS No. 140.
1. Read the Basis for Conclusions, paragraphs 116 and 117 in SFAS No. 140. What issue was the FASB trying to address?
2. Read the Basis for Conclusions, paragraphs 132 through 133, paragraphs 138 through 140, and paragraphs 143 through 146 in SFAS No. 140. What are the two fundamental approaches that the board considered in the treatment of transfers of financial assets? Which did the board choose, and why?
Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...