Intermediate Accounting 14th Edition

Published by Wiley
ISBN 10: 0470587237
ISBN 13: 978-0-47058-723-2

Chapter 8 - Valuation of Inventories: A Cost-Basis Approach - Questions - Page 469: 5

Answer

Product financing arrangements refer to off-balance-sheet financing devices. These arrangements make it seem like a company has sold its inventory or never taken title to it so they can keep loans off their balance sheet.

Work Step by Step

A product financing arrangement should not be recorded as a sale, on the other hand, the inventory and related liability should be reported on the balance sheet.
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