Please help me understand the below statement:
" When the receivables are securitized, the sponsor removes the receivables from the balance sheet and reports the cash inflow as an operating activity in the cash flow statement. If the sponsor still has recourse, the transaction is nothing more than collateralised borrowing."
Firstly, I did not understand the last statement “If the sponsor still has recourse, the transaction is nothing more than a collateralised borrowing.” Please elaborate
Secondly, help me understand why that cash inflow should be categorised as “cash from operating activity” for the sponsor( why we are seeing from the sponsor perspective only ignoring SPE?).
I am confused because when the statements are consolidated; for SPE it is CFF because it might have taken a bank loan, while for the sponsor it would be CFO because the sponsor is getting money from selling its account receivables. But how this consolidation happens? why different views within the same entity. Don’t you think it should have a more conservative approach?