CFA Practice Question

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CFA Practice Question

Which statement(s) is (are) true?

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.
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