Securitizing receivables increases cash collected or decreases? collected

bcp901

Company securitizes $2 million of its receivables. Does cash collected from customers increase by $2 M or decrease by $2 M, or does it stay the same?

Rasec

cash collected from customers =
Change in Revenues - Delta AR + Delta Unearned Earnings

Delta AR = -2

So Cash Collected would go UP!...

[but in the context of things - this is not sustainable].

CP

needhelp1700

Looks like it goes down by $2!

wxs1986

- (-2)

CP

comp_sci_kid

the timing of the AR Securitization is not clear... also whether the 16 Mill is after the asset securitiziation or before...

CP

WarrenB1

Yep, i know that question. Its a matter of timing of the securitization.

But while we are on this topic, does anyone have a quick and easy tutorial on what happens in a securitization of receivables?

Like you sell your receivables, what happens to all your ratios? For some reason I keep struggling with this. If anyone has a link, that would be nice. thanks.

mp3bu

It depends of course!

If you securitize A/R without consolidating the SPE, your A/R drop by the amount that you securitized), so A/R goes down...think of ratios that depend on A/R.

If you consolidate the SPE, then A/R does not change.

Also, you have another asset added, which is the investment in the SPE.

mengxu

ok, not sure the best way to think of this, but it seems they are assuming that if the $2million of A/R securitization had not been securitized, your A/R would be $118. Thus, Cash = $137 - (118-111) = $130..

But, I thought the whole idea of A/R securitization is to collect the cash! So, the way I would do it is $137 + $2 - ($116-$111) = $134.

Newhuman

u know, for all the agony with consolidating the SPE, seriously, it is possible to NOT consolidate the #$!@ SPE?!

when would you ever not consolidate?

i feel like at some point you could have QSPEs, etc and they havent deleted from curriculum yet!

when would you ever NOT consolidate, under GAAP or IFRS?