Sell and buy back = Loan
A company sells inventory to a finance house and agrees to buy it back later at the same price +10%
This is really a secured loan plus interest.
To show it as a sale would not be a faithful representation of the transaction.
Syllabus A1cd
Faithful Representation 6 / 14
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Sell and buy back = Loan
A company sells inventory to a finance house and agrees to buy it back later at the same price +10%
This is really a secured loan plus interest.
To show it as a sale would not be a faithful representation of the transaction.
Page 1
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Convertible Loans
A company issues a convertible loan.
This is actually a loan with an equity option and should always be split and shown in Loans and Equity
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Convertible Loans
A company issues a convertible loan.
This is actually a loan with an equity option and should always be split and shown in Loans and Equity
Page 2
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0% finance
There is no such thing as 0% finance
All that's happening is the price of the item is artificially high (it includes the interest received)
So always show interest received and sale of item
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0% finance
There is no such thing as 0% finance
All that's happening is the price of the item is artificially high (it includes the interest received)
So always show interest received and sale of item
Page 3
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Redeemable Preference Shares
These are always shown as debt - never equity
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Factored Receivables WITH recourse
These are still receivables until the debtor has paid
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Factored Receivables WITHOUT recourse
These are no longer debtors - the receivable is derecognised
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Factored Receivables WITHOUT recourse
These are no longer debtors - the receivable is derecognised
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