CFA Practice Question

CFA Practice Question

Reporting rules allow companies to sell their receivables without recourse and to record them as sales rather than as liabilities if they meet all of the following criteria except ______
A. Buyer has the right to pledge or exchange transferred assets.
B. Buyer has the right to return assets to seller 1 year after completion of the transaction.
C. Seller surrenders effective control over transferred assets and is isolated from them.
Explanation: The purpose of these criteria are to assure that a true sale occurred and it wasn't just a sale for the purposes of improving the look of the financial statements.

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