Summary of Statement No. 77

Reporting by Transferors for Transfers of Receivables with Recourse (Issued 12/83)


This Statement specifies that a transferor ordinarily should report a sale of receivables with recourse transaction as a sale if (a) the transferor surrenders its control of the future economic benefits relating to the receivables, (b) the transferor can reasonably estimate its obligation under the recourse provisions, and (c) the transferee cannot return the receivables to the transferor except pursuant to the recourse provisions. If those conditions do not exist, the amount of proceeds from the transfer should be reported as a liability.

This Statement is effective for transfers made after December 31, 1983, including those made pursuant to earlier agreements. It amends a minor provision of FASB Statement No. 13, Accounting for Leases.

This project was undertaken in response to an Issues Paper prepared by the AICPA and in considering an AICPA Statement of Position, both of which addressed transfers of receivables with recourse. The conclusions of this Statement differ from those reached by the AICPA. It is not expected to change predominant practice generally except that gain or loss on a transfer will be recognized when a transfer is made rather than over the period the receivables remain outstanding.