FAR Receivables · Updated November 2026
Factoring Receivables: Did the Company Sell Them or Borrow Against Them?
Receiving cash does not automatically mean the receivables were sold.
Sale accounting
A transfer can qualify for sale accounting when applicable isolation and control criteria are satisfied, allowing derecognition of the transferred receivables.
Secured borrowing
If sale criteria are not met, the company generally keeps the receivables and records a financing liability.
Recourse
Recourse means the transferor retains some exposure, but recourse by itself does not automatically decide the accounting.
Continuing involvement
Servicing rights, guarantees, options, and other continuing involvement can affect the sale-versus-borrowing analysis.
The takeaway
Determine whether control transferred. If not, the cash received may represent financing rather than sale proceeds.
Related Summit guides
FAQ
Does factoring always remove receivables from the balance sheet?
No.
Does recourse matter?
Yes.
Can receivables secure a borrowing?
Yes.