- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 10. Financial Reporting Quality
- Subject 4. Detection of Financial Reporting Quality Issues
CFA Practice Question
Which statement(s) is (are) true?
II. Cash provided from outright sales of accounts receivable to a factor is reported as financing cash flow.
III. Cash provided from outright sales of accounts receivable through a securitization agreement is reported as financing cash flow.
I. Cash provided from outright sales of accounts receivable, whether to a factor or through a securitization agreement, is reported as operating cash flow.
II. Cash provided from outright sales of accounts receivable to a factor is reported as financing cash flow.
III. Cash provided from outright sales of accounts receivable through a securitization agreement is reported as financing cash flow.
Correct Answer: I
Such operating cash flow is effectively borrowed from a future reporting period and is not sustainable.
User Contributed Comments 2
| User | Comment |
|---|---|
| ehc0791 | I is correct. For reporting purpose, factoring and securitizing are CFO, but for analytical purpose, factoring with recourse should be reclassified as CFF. |
| Lavay | GAAP sees any A/R sale thru securitization or otherwise an outright sales, and proceeds should be under CFO. |