A company S form a QSPE through which it can sell up to 100 million of its accounts receivables at any given time. The consolidated financial results of the parent company would show a higher : A. revenue figure B. Cash Balance at the end of that year C. account receivable balance at the end of the year As per my understanding under consolidation methods Assets and Liablities are added across hence the accounts receivable which are the assets of the SPE should be added to the beneficiary’s assets resulting in higher accounts receivables. The cash should also increase as the accounts receivables would be securitized leading to increase of cash balance The answer is B. Can someone explain why is C also not the answer ?
i guess if it sells its A/R thru factoring or securitization, the A/R decreases and cash increases.
I agree with that but we are now preparing a consolidated balance sheet in which case the assets of the SPE i.e. A/Rs would become part of the consolidated B/S and hence the A/Rs should also increase Correct me if I am wrong ?
QSPE is not consolidated. QSPE is only Equity isn’t it?
I think that could be the reason. Thanks once again CP