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Dear Sir, i am unable to understand this topic.please help me in this topic including four cases with example.
Consignment inventory
Sale and repurchase agreement
Sale and lease back
Factoring Of Receivables.
I am waiting for your prompt replyConsignment inventory – it’s not a sale – it’s still our inventory. It may have been recorded as a sale but risks and rewards have not changed hands. Therefore cancel the sale and bring the goods back into inventory
Sale and repurchase – it’s not a sale – it’s a loan. It may have been recorded as a sale but risks and rewards have not changed hands. Therefore cancel the sale and bring the goods back into inventory. Whisky is a good example where a distiller sells the immature whisky to the bank but has the opportunity to buy it back after 8 years.
Sale and leaseback – it’s not a sale (unless it’s an operating leaseback) – it’s effectively a secured loan where the original owner of (say) the building gives us money and we transfer the building. But, under a finance lease, we pretend that ownership has not changed hands
Debt factoring – it’s not a sale – it’s a short term loan. When the factor has the opportunity to return the debt if not collected within a specified time, surely the requirement of “substantially the whole of the risks and rewards of ownership” have not been transferred
ok?
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