Skip to main content
Article thumbnail
Location of Repository

ISSUE

By 

Abstract

A financial institution involved in commercial lending makes a short-term loan (for example, 90 days) to a borrower under a long-term credit commitment (for example, 5 years). The financial institution transfers the short-term loan, without recourse, to a third-party purchaser for the remaining term of the loan. The risk of loss relating to the short-term loan is legally transferred to the purchaser, and the financial institution has no contractual obligation to repurchase the shortterm loan. Under the long-term credit commitment, the financial institution may, at the maturity of the short-term loan, relend to the borrower. However, the financial institution may refuse to relend to the borrower based on a current credit evaluation or if any covenant under the long-term commitment is not satisfied. The issue is whether the transfer of the short-term loan should be accounted for as a sale or as a financing. Copyright © 2010, Financial Accounting Standards Board Not for redistributio

Year: 1987
OAI identifier: oai:CiteSeerX.psu:10.1.1.353.1545
Provided by: CiteSeerX
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://citeseerx.ist.psu.edu/v... (external link)
  • Suggested articles


    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.