Companies often transform liquid assets into securities that can be sold or transferred to fund working capital and liquidity needs. Examples include asset factoring arrangements and transfers of assets (often trade accounts receivables) to bank-sponsored commercial paper conduits. There are sometimes referred to as securitizations.
Accounting guidance governing such transactions has significantly altered the way trade receivable transfers are analyzed. Many structures used to effect such transfers likely will be accounted for as secured borrowings.
The accounting governing securitization structures can be difficult to interpret and apply and may inadvertently limit future financing. For example:
A company considering securitization transfers should:
PwC is a trusted resource for advising companies on new structures that continue to evolve in the marketplace and assessing these transactions under the new guidance. Our knowledge of accounting and financial reporting issues puts you in a stronger position to develop sounder securitization practices. This support can help you develop strategies to withstand regulatory scrutiny, anticipate potential areas of SEC focus in future filings and meet constantly evolving expectations for clear and transparent financial reporting.