Elans guides mentions in LOS24d that when a company sells its receivables to a qualified special purpose entity,
it needs to present consolidated statements
in example it sold 100m receivables to QSPE and in calculatind adjusted D/E ratio added 100m to debt
isn’t receivable an asset? why is it added to debt?
If the receivables were sold with recourse, the economic substance of the transaction is that the company borrowed money from the QSPE and used the receivables as collateral. Thus, an analyst will add the receivables back as an asset and add a liability for the amount of the loan.
I see… thanks! i didn’t look at receivables as colleteral… but now it make sense.