Chapter 7: Cash and Receivables
When looking at the FASB codification, there are two main sections to examine about the transfers of receivables. The first section is 860-10 Transfers and Servicing, and the second section to consider would be 310-10 which is Receivables Overall. When finding other examples of continuing involvement, I looked into section 860-10-55. In section 860-10-10-1 it listed the objectives for reporting transfers of receivables. When searching for these objectives, it was stated that there was a superseding of the amendment. The addition stated “comparability and consistency in accounting for transferred financial assets will also be improved through clarifications of the requirements for isolation and limitations on portions of financial assets that are eligible for sale accounting.” In other words, financial statements will become more accurate and less fraudulently represented to users and the objective is not to double count for sales, or attempt to include transfers or receivables within a company’s operating income and revenue. According to the master glossary within the FASB codification, there are definitions for transfer, recourse, and collateral. Transfer is defined as “the conveyance of noncash financial assets by and to someone other than the issuer of that financial asset”. Recourse is defined as “the right of a transferee of receivables to receive payment from the transferor of those receivables for any of the following: a. failure of debtors to pay when due b. the effects of prepayments c. adjustments resulting from defects in the eligibility of the transferred receivables.” Contractually, the best way to have is a clause stating without recourse. Collateral is defined by the Code as, “personal or real property in which a security interest has been given.” In other words, when making a transfer there must be something else that can be held onto in trust of the dealer actually following through with the transfer. Collateral usually are dealt with mortgages and the house would be the collateral. According to the master glossary of the FASB codification, continuing involvement is defined as the following: “Any involvement with the transferred financial assets that permits the transferor to receive cash flows or other benefits that arise from the transferred financial assets or that obligates the transferor to provide additional cash flows or other assets to any party related to the transfer .” Other examples that qualify as continuing involvement include but are not limited to: servicing arrangements, recourse or guarantee arrangements, agreements to purchase or redeem transferred financial assets, options written or held, pledges of collateral and derivative instruments that are entered into contemporaneously with, or in contemplation of, the transfer.
Chapter 4: Income Statement and Related Information
When exploring the circumstances and issues regarding comprehensive income, the FASB codification covers the area in section 210-10-00 through 210-10-75. This authoritative literature addresses the status, overview, background, objectives, and many other various aspects of comprehensive income. According to the text, companies must display the components of other comprehensive income in one of three ways. Use a second income statement, a combined statement of comprehensive income, or as a part of the statement of stockholders’ equity. All revenues, gains, expenses, and losses are reported in net income but also in comprehensive income. The other additions to comprehensive income come from all gains and losses that bypass net income but DO affect stockholders’ equity. Comprehensive income is listed on the Balance sheet underneath the net income amount so that it is not included with net income. “On May 26, 2010, the Board issued a proposed Accounting Standards Update, Statement of Comprehensive Income.” According to the FASB codification, comprehensive income...
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