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Sir full recourse and without recourse what do these mean and should these be be recognized as an asset in SOFP? I understand factoring but those terms I do not understand very well.
All you need to remember is that a sale of receivables with recourse to a factor is not really a sale of the receivables at all
It’s a securitised loan from the factor (Dr Cash Cr Loan)
In a question the accountant at the company will have Dr Cash Dr Finance Costs and Cr Receivables and that entry will need to be undone / reversed
If it happens to be an agreement whereby the factor is not able to return the receivables in the event that those receivables fail to pay, that is factoring without recourse and, in that situation, the sale of the receivables IS made (Dr Cash Cr Receivables) but this situation is never examined
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