once AR is securitized, under which circumstances it will be put on the b/s, and how it impact the asset and liability on b/s ? Thanks.
was this guy’s post from your last same question not helpful? “A company sells A/R off to a SPE. The SPE buys the A/R and then provides cash back to the company for the asset. This is your typical scenario. Think about your accounting formula, if you sell an asset, in this case A/R, you are converting that asset into cash so you can’t double count it. Cash up, A/R down. So your current ratio stays the same. The receivables will entirely come off of the BS under normal circumstances.” I think you are getting this mixed up with ADJUSTING for a company that sold off its A/R. In order to adjust for this sketchy business, you ADD BACK the amount of the securitization to Assets and Liabilities, effectively reversing what the company did. Does that help?
in what case we need to adjust it back to B/S on asset and liability? Thanks. AndrewUNH Wrote: ------------------------------------------------------- > was this guy’s post from your last same question > not helpful? > > “A company sells A/R off to a SPE. The SPE buys > the A/R and then provides cash back to the company > for the asset. This is your typical scenario. > Think about your accounting formula, if you sell > an asset, in this case A/R, you are converting > that asset into cash so you can’t double count it. > Cash up, A/R down. So your current ratio stays the > same. The receivables will entirely come off of > the BS under normal circumstances.” > > I think you are getting this mixed up with > ADJUSTING for a company that sold off its A/R. In > order to adjust for this sketchy business, you ADD > BACK the amount of the securitization to Assets > and Liabilities, effectively reversing what the > company did. > > Does that help?
Adjusting B/S means consolidation when we own >50% of subsidiary. However, we consolidate the SPE even when we do not own >50% if we have recourse or if we have residual interest.
Yes, or the problem just says “adjust this for the A/R they securitized…” janardhanc Wrote: ------------------------------------------------------- > Adjusting B/S means consolidation when we own >50% > of subsidiary. However, we consolidate the SPE > even when we do not own >50% if we have recourse > or if we have residual interest.
If the SPE is not a ‘qualifying SPE’ then the assets and liabilities will already have been consolidated with the financial statements of the firm, if not then adjustments may be required, im not sure if they will have a question that will ask you to make adjustments