## f14-treatment-of-factoring-transactions

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### SECTION I: THE ISSUE — background and definitions
- Factoring defined: purchase of non‑tradable trade accounts receivable by a financial company (factor) at a discount; part of “Receivables Finance”.
- Two basic types:
  - Non‑recourse factoring: factor assumes full risk of non‑payment; supplier immediately receives full amount net of discount (paragraphs 3 and 12).
  - Recourse factoring: factor holds supplier partly/fully responsible for uncollectable receivables; initial payment may be a percentage with remainder retained in “reserve”; supplier may have to “buy back” invoices plus interest/fee if debtor defaults (paragraphs 4 and 18).
- Distinction from invoice discounting/loan‑advance trade financing: factoring transfers legal claims; invoice discounting keeps invoices as collateral (paragraph 6).
- Relevant guidance and standards referenced:
  - BPM6 paragraph 5.72, BPM6 paragraphs 3.82 and 9.33.
  - 2008 SNA, MFS (ECB Manual on MFI Balance Sheet Statistics, 2019), MFSMCG paragraph 4.99.
  - IFRS 9 derecognition and measurement provisions (selected).

### Issues for discussion (Issues 1 and 2)
- Issue 1 (classification, valuation, factor income):
  - Tension: BPM6 treatment (reclassify sold trade credits to other accounts receivable/payable) versus MFS practice (classify factoring as loans on factor’s balance sheet) (paragraphs 7–8, 12).
  - Valuation/income question: record factor’s discount as valuation change (other changes in financial assets and liabilities) per BPM6 paragraph 3.82, or as factor income/sale recognizing the factor as producer of financial intermediation services (paragraphs 9, 13).
  - Economic beneficiary ambiguity: typically supplier benefits (liquidity) but reverse factoring supports debtor‑financing interpretation (paragraphs 14–16).
- Issue 2 (recourse factoring mechanics):
  - Whether receivables remain on supplier’s books because supplier retains economic risk (paragraph 17).
  - Treatment of reserve and recourse if recourse factoring is a true sale: reserve could be supplier claim against factor or partitioned claim toward debtor; need to distinguish reserve amount from recourse liability (paragraphs 18–19).
  - Reclassification at inception may be recorded as transaction or other changes; drafting team prefers transactions (paragraph 32).

### Options considered — non‑recourse factoring (Options 1, 2.1–2.4)
- Option 1 (status quo with clarification):
  - Apply BPM6 paragraph 3.82 to factoring (paragraph 21).
  - Reclassify claims sold to other accounts receivable/payable.
  - Value stocks at face value (minus any repayment on invoices plus any other nominal/contractual interest/fee receivable from buyer except the discount).
  - Record discount as valuation changes (other changes in financial assets and liabilities account); exclude discount from income/sale.
  - Recommend BPM7 include more detailed classification/valuation guidance and updates to 2008 SNA and MFSMCG.
  - If chosen, imputation for factors’ assets in their balance sheet should be made.
- Option 2 family (treat discount as transaction — factor’s income recorded):
  - Option 2.1:
    - Factor’s claim: other accounts receivable.
    - Factor’s income: Fee.
    - Who pays: Supplier.
    - FISIM: No.
    - Rationale: factor provides discounting service.
  - Option 2.2:
    - Factor’s claim: other accounts receivable.
    - Factor’s income: Interest.
    - Who pays: Supplier.
    - FISIM: No.
    - Notes: treats factor as providing funds to supplier though no explicit supplier–factor liability exists.
  - Option 2.3:
    - Factor’s claim: Loan.
    - Factor’s income: Interest.
    - Who pays: Debtor.
    - FISIM: Yes.
    - Other treatments: Adjustment to goods and services account; trilateral implicit debtor financing.
  - Option 2.4:
    - Factor’s claim: Loan.
    - Factor’s income: Fee.
    - Who pays: Supplier.
    - FISIM: No.
    - Rationale: compromise between 2.1 and 2.3.

### Options for recourse factoring (Options 3.1–3.3)
- Option 3.1:
  - Treat recourse factoring the same as non‑recourse factoring.
  - Recourse regarded as a guarantee; reserve regarded as collateral.
- Option 3.2:
  - Treat recourse factoring as a loan provided to the supplier.
  - Apply FISIM calculations; liability of debtor to supplier remains as trade credit.
  - Reserve and recourse not recorded in macroeconomic statistics.
- Option 3.3:
  - Treat as a partial outright sale: only part of invoice beyond recourse liability is sold.
  - Amount up to recourse liability remains supplier’s ownership; if reserve < recourse liability, difference constitutes a cash advance recorded as accounts payable by supplier to factor.

### Drafting team decisions, preferences, and rationale (paragraphs 25–35)
- Paragraph 25 — reject Option 1:
  - Current guidance insufficient; inconsistent with business practice and accounting standards.
  - Discount should be recorded as income/sale to recognize factor’s role as financial intermediary.
- Paragraphs 26–29 — majority preference for treating factor’s income as a fee:
  - Most drafting team members preferred options treating factor’s income as a fee.
  - Preferred option for non‑recourse factoring: Option 2.1 supported by all except one member (paragraph 27).
  - Option 2.2 and Option 2.3 not recommended by most: 2.2 rejected due to lack of supplier–factor liability; 2.3 rejected as too complex and burdensome for compilers (paragraph 29).
  - One member supported Option 2.4; one FITT member supported Option 2.3 with modification (paragraphs 27, 33, 34).
- Paragraphs 30–31 — recourse factoring preference:
  - Most drafting team members supported Option 3.1 (treat recourse like non‑recourse): recourse is a guarantee called only rarely; reserve viewed as collateral and factor’s direct collection supports view of true sale (paragraph 30).
  - One member advanced economic‑ownership approach akin to Option 3.3: retain ownership for invoice portion up to recourse liability; if recourse > reserve, difference treated as cash advance recorded as other accounts payable by supplier to factor (paragraph 31).
- Paragraph 32 — reclassification via transactions:
  - Strong support to record reclassification from trade credit to loans/other accounts receivable as transactions in the financial account rather than as other changes affecting positions.
- FITT consultation outcomes (paragraph 33–35):
  - FITT members supported rejecting Option 1; four preferred Option 2.1; one supported Option 2.3 (with modification).
  - For recourse factoring, three FITT members supported Option 3.1 and one supported Option 3.3.
  - One FITT member argued for loan classification to ensure factoring included in credit aggregates of other financial corporations (paragraph 34).

### Numerical examples and whom‑to‑whom positions (Annex IV and Option 3 examples)
- Option 3.1 numerical example (invoice value 100; Discount 10; Reserve 20; Recourse 100):
  - Transaction reclassification converts trade credit to other accounts receivable = 100.
  - Entries:
    - Factoring fee = 10 (supplier import -10).
    - Other accounts receivable (transferred invoice) = 100 (factor asset; supplier liability -100).
    - Other accounts receivable (collateral) = 20 (supplier asset; factor liability 20).
    - Cash to supplier = 70 (cash -70 from factor; supplier +70).
- Option 3.2 numerical example (invoice value 100; Discount 10; Normal interest rate 5%; Reserve 20; Recourse 50):
  - Example entries include:
    - FISIM 5.5 (factor export 5.5; debtor import -5.5).
    - Interest (against supplier) 4.5 (factor export 4.5; supplier import -4.5).
    - Loans recorded: Loans 80 (factor asset); Cash -70; net loan funding illustrated in example.
- Option 3.3 numerical example (invoice value 100; Discount 10; Reserve 20; Recourse 45; Difference between Reserve and Recourse (cash advance) 25):
  - Transaction entries:
    - Fee 10 (supplier import -10).
    - Other accounts receivable plus fee 55 (factor asset; supplier liability -55).
    - Other accounts receivable (against supplier) 25 (temporary claim).
    - Cash -70 (factor cash outflow); supplier receives 70.
- Positions after transaction example (preliminary whom‑to‑whom snapshot):
  - Factor D 55; Supplier D 45; Factor S 25; Debtor S 45; Debtor F 55; Supplier F 25.
- Scenario outcomes presented in illustrative sequences:
  - Full Repayment, Full Non‑Payment, Bankruptcy, Non‑Payment equal to reserve, Non‑Payment less than reserve — each presented with exact whom‑to‑whom flows and accounting reversals in the source examples.

### Accounting practice summaries (Annex V), IFRS 9 alignment, and valuation
- Non‑recourse factoring in accounting practice:
  - Treated as true sale in both factor’s and supplier’s balance sheets; supplier derecognizes receivable and records sale loss; factor recognizes claim equal to cash paid and accrues discount as effective interest (IFRS 9 5.4.1).
- Recourse factoring accounting divergence:
  - Whether derecognition occurs depends on retained risks and rewards per IFRS derecognition criteria (3.2.3–3.2.6); some jurisdictions (e.g., Korean standards) record recourse factoring as a loan.
- IFRS 9 measurement and interest recognition:
  - Measurement at amortised cost conditions: IFRS 9 4.1.2.
  - Effective interest method and initial recognition principles cited (IFRS 9 5.1.1; 5.4.1–5.4.2).
- Valuation rule guidance in MFIs manual:
  - Factoring operations should be recorded at invoice value less discount retained as collateral rather than at fair value in some guidance examples.
- Annex VII conclusions on discount classification:
  - Consensus: discount should be reflected as output of financial intermediary (factoring service).
  - Discount conceptually consists of a factoring fee and interest; when separable cannot be, one category chosen and recorded; effective interest method applies in factor accounting.

### Key policy and compilation recommendations
- Reject Option 1 (status quo) due to insufficient guidance and inconsistency with business practices and accounting standards.
- Prefer treating factor’s discount as income/sale (financial intermediation services), not as valuation change, in many cases.
- Recommended preferred treatments:
  - Non‑recourse factoring: Option 2.1 (claim against debtor classified as other accounts receivable) recommended by the drafting team, with acknowledgment of alternative views (Options 2.4 and 2.3).
  - Recourse factoring: majority preference for Option 3.1 (treat like non‑recourse factoring), with one substantial alternative view supporting Option 3.3 logic.
- Record reclassification from trade credit to loans/other accounts receivable as transactions in the financial account rather than as other changes affecting positions (paragraph 32).
- Update BPM/Compilation Guide (BPM7) guidance with practical instructions on factoring and supply‑chain finance instruments; provide detailed annexes and numerical examples for implementation.

### Questions for discussion (numbered as in the source)
- 1) Do you agree with the GN proposal on rejecting Option 1 and instead consider other options discussed in the GN for the statistical treatment of the non‑recourse and the recourse factoring?
- 2) If the answer to question 1 is yes, which option do you prefer for the statistical treatment of non‑recourse factoring (Options 2.1—2.4)?
- 3) If the answer to question 1 is yes, which option do you prefer for the treatment of recourse factoring (Options 3.1—3.3)?
- 4) Do you agree that the instrument reclassification from trade credit to loans/other accounts receivable should be recorded as a transaction in the financial account rather than as other changes affecting positions?
- 5) Do you consider that the other types of supply chain finance need further guidance in BPM7 or its Compilation Guide?

*Source: Guidance Note drafting team and IMF — SECTION I: THE ISSUE, Annexes II–VII, and related examples from the Guidance Note on factoring transactions.*

### SECTION I: THE ISSUE

### f14-treatment-of-factoring-transactions - SECTION I: THE ISSUE

### Background
- Factoring is a transaction in which a financial company (factor, which can be a bank, a specialized factoring company, or other financial organization) buys trade accounts receivable from a supplier at a discount.
- The accounts receivable concerned are non-tradable trade-related receivables arising from the provision of goods, services, or work in progress.
- Factoring belongs to the broader category of “Receivables Finance”, where a supplier receives an early discounted payment for his trade account receivables; transactions bridge the trade cycle funding gap and are performed by specialized financial institutions or by commercial banks.
- Two basic types of factoring:
  - Non-recourse factoring: the factor assumes the full risk of non-payment by the debtors at maturity and charges the supplier a higher percentage of the receivables (“discount”); the supplier immediately receives the full amount net of the discount and has no further obligation (paragraphs 3 and 12).
  - Recourse factoring: the factor holds the supplier partly or fully responsible for uncollectable receivables at maturity; initial payment may be a percentage of the accounts receivable with the remainder retained in “reserve”; supplier may have to “buy back” invoices plus any interest/fee due if debtor defaults (paragraphs 4 and 18).
- Factoring is commonly viewed as a purchase/sale of invoices (transfer of legal claim); differentiated from “invoice discounting” or “Loan/Advance-based trade financing” where invoices remain collateral and claims are not transferred (paragraph 6).
- Existing macroeconomic/statistical guidance shows divergence:
  - BPM6 paragraph 5.72: trade credits sold to third parties should be reclassified as other accounts receivable/payable; invoices on factors’ balance sheets should be classified as other accounts receivable/payable (paragraph 7).
  - 2008 SNA: does not discuss factoring transactions explicitly but mentions factoring services in the list of services specialized financial corporations can provide (paragraph 7).
  - MFS guidance (ECB Manual on Monetary and Financial Institution Balance Sheet Statistics, 2019) recommends classifying factoring instruments as loans and suggests differing counterpart treatments by factoring type (paragraph 8).
  - MFSMCG paragraph 4.99 requires export bills discounted entail a loan to the debtor (paragraph 8).
- Valuation and income recognition questions:
  - BPM6 paragraphs 3.82 and 9.33 suggest valuation differences for sold receivables may be recorded as valuation changes rather than income; some drafters of the Guidance Note (GN) argue factor’s discount should be recorded as factor’s income/sale because the factor is a producer with costs (paragraphs 9 and 13).
  - IFRS 9 (accounting) recommends recognition on factor’s balance sheet based on amortized cost and income recorded as interest using the effective rate; factoring also involves collection/accounting services beyond provision of funds (paragraph 10).

### Issues for discussion
- Two main issues are addressed separately (paragraph 11):
  - Issue 1: Treatment of factoring transactions and claims (classification of instruments, valuation of stocks, treatment of factor income).
  - Issue 2: Whether recourse factoring requires different treatment (treatment of accounts receivable, funds to supplier, recourse and reserve mechanics).
- Key discussion points for Issue 1:
  - In non-recourse factoring there is a true sale of trade receivables from supplier to factor; BPM6 paragraph 5.72 treats such sales as reclassification from trade credit to accounts receivable/payable (paragraph 12).
  - Tension exists between BPM6 guidance (other accounts receivable) and MFS practice (loans on factor’s balance sheet) (paragraph 12).
  - Treatment of the discount: whether the discount is a valuation change or factor’s income/sale; treating discount as income recognizes the factor’s intermediary production and avoids anomalous gross operating surplus with no output (paragraph 13).
  - Who benefits economically: normally supplier benefits (liquidity improvement) rather than debtor; reverse factoring (buyer-led) complicates this view and supports debtor-financing interpretation but statistical treatment should follow factoring principles (paragraphs 14–16).
- Key discussion points for Issue 2 (recourse factoring):
  - First question: whether accounts receivable under recourse remain on supplier’s books because economic risks remain with supplier; if so, funds from factor are a liability of supplier and factor’s income should be recorded as interest (paragraph 17).
  - Second question: how to treat reserve and recourse if recourse factoring is seen as a true sale—reserve could be a supplier claim against factor or a partitioned claim toward debtor; classification of reserve and distinction between reserve amount and recourse liability require clarification (paragraphs 18–19).
  - Reserve may be reclassified from trade credit to another instrument category similar to the part not covered by the reserve (paragraph 19).

### Options to consider (summary of proposed approaches)
- The drafting team considered Option 1, Options 2.1—2.4 for Issue 1 (treatment of factoring transactions and claims), and Options 3.1—3.3 for Issue 2 (treatment of recourse factoring). The reclassification method at inception (transaction vs. other volume change) can apply to any option (paragraph 20).
- Option 1 (status quo with clarification):
  - Apply BPM6 paragraph 3.82 on “other accounts receivable/payable sold at a discount” to factoring (paragraph 21).
  - Under Option 1:
    - Reclassify claims sold to other accounts receivable/payable.
    - Value stocks at face value (minus any repayment on invoices plus any other nominal/contractual interest/fee receivable from buyer except the discount).
    - Record the discount as valuation changes (other changes in financial assets and liabilities account) and exclude discount from income/sale.
    - Recommend BPM7 include more detailed classification/valuation guidance and updates to 2008 SNA and MFSMCG.
    - If Option 1 chosen, imputation for factors’ assets in their balance sheet should be made (paragraph 21).
- Options for non-recourse factoring (Options 2.1–2.4) — the factor’s claim is always against the debtor (true sale). Distinctions focus on instrument classification and treatment of factor income (paragraph 22):
  - Option 2.1:
    - Factor’s claim: other accounts receivable.
    - Factor’s income: Fee.
    - Who pays factor’s income: Supplier.
    - FISIM: No.
    - Rationale: factor provides discounting service similar to cheque discounting or payment facilitating services.
  - Option 2.2:
    - Factor’s claim: other accounts receivable.
    - Factor’s income: Interest.
    - Who pays factor’s income: Supplier.
    - FISIM: No.
    - Notes: treats factor as providing funds to supplier so income is interest although no explicit supplier–factor liability exists.
  - Option 2.3:
    - Factor’s claim: Loan.
    - Factor’s income: Interest.
    - Who pays factor’s income: Debtor.
    - FISIM: Yes.
    - Other treatments: Adjustment to the goods and services account (see Annex III and Annex IV).
    - Rationale: treats arrangement as trilateral with implicit debtor financing; requires FISIM calculations.
  - Option 2.4:
    - Factor’s claim: Loan.
    - Factor’s income: Fee.
    - Who pays factor’s income: Supplier.
    - FISIM: No.
    - Rationale: compromise between Options 2.1 and 2.3.
- Table 1 (summarized in the source) lays out the options for treatment of non-recourse factoring (paragraph 23; table reproduced in the source).

### Implementation and further materials
- The GN contains Annex II (detailed explanations and terminology), Annex III (detailed discussion of options), Annex IV (numerical examples illustrating recordings in the balance of payments and the IIP), Annex V (accounting practice descriptions), Annex VI (alternative views on recourse factoring), and Annex VII (income and instrument classification discussions) referenced throughout the discussion (paragraphs 1, 6, 9, 10, 13, 16, 19, 20, 21, 23).
- All options apply to both ordinary factoring and reverse factoring transactions (paragraph 20, footnote).

*Prepared by the Guidance Note drafting team as presented in SECTION I: THE ISSUE of the source document.*

### 24.      The following opti ons are proposed for the treatment of recourse factoring. As there are

### 24. The following options are proposed for the treatment of recourse factoring. As there are also reserve and recourse, additional guidance is required for their classification. The following options on recourse factoring are discussed.

### Options for recourse factoring
- Option 3.1: Recourse factoring is treated in the same manner as non-recourse factoring. Therefore, the selected Option 2 for the non-recourse factoring would also be applicable to recourse factoring contracts. Under this option the recourse should be regarded as a guarantee, and the reserve as a collateral.
- Option 3.2: Recourse factoring is treated as a loan provided to the supplier. Calculations for FISIM should be applied under this option. The liability of the debtor to the supplier remains as trade credit. The reserve and the recourse are not recorded in the macroeconomic statistics.
- Option 3.3: Recourse factoring is treated as a partial outright sale of the invoices corresponding to the part beyond the recourse liability. The amount of up to the recourse liability remains under the ownership of the supplier as it carries the risk of un-collectability vis-à-vis the debtor. In case the reserve is lower than the recourse liability, this difference would constitute a cash advance and is to be recorded as accounts payable by the supplier to the factor.

### Section II: Outcomes — decisions, preferences, and rationale (paragraphs 25–35)
- Paragraph 25
  - The drafting team rejected Option 1 as the current guidance in the manuals is not sufficient for proper recording of factoring transactions in macroeconomic statistics.
  - Current/implicit treatment in BPM6 and the 2008 SNA needs clarification with respect to income received by the factor so as to recognize its role as producer (financial intermediation services).
  - Many countries classify factoring as a loan and reflect the income as interest; Option 1 is at odds with business practices and accounting standards that include the discount as interest/fee in the factors’ financial statements.
  - The discount earned by the factor should be recorded as income/sale, and not as revaluation, to recognize the factor’s role as financial intermediary and recording financial services.

- Paragraph 26
  - Support for classifying factors’ income as a service is linked to 2008 SNA paragraphs 6.160c and 6.170–6.174 and ESA 2010 paragraph 3.73 on implicit fees charged by traders on securities transactions where purchase and resale prices are partitioned to recognize a service component.
  - Analogous treatment: specialized financial intermediaries’ earnings recorded as income rather than revaluation; merchants’ purchase-for-resale treated as output/income rather than holding gain unless genuine price change occurred.

- Paragraph 27
  - Most drafting team members preferred options treating factors’ income as a fee.
  - Option 2.1 (claim against the debtor classified as other accounts payable) is supported by all except one member:
    - Follows current BPM6 treatment.
    - Assumes implicit financing of the debtor may be attractive for large transactions but supplier typically makes final decision.
    - Source of factor’s income seen as the supplier, not the debtor.
    - Factor regarded as providing a lump-sum factor fee for fast cash; absence of an actual claim against the supplier suggests interest is not correct treatment of factoring discount.
  - One member supported Option 2.4 (claim against the debtor classified as a loan) for similar reasons concerning factor’s income treatment.

- Paragraph 28
  - Viewing the supplier as the active party benefiting economically (improved working capital) suggests classifying factoring claims as other accounts receivable when no claim exists against the supplier.
  - Option 2.4 reflects an alternative trilateral view, making a loan classification preferable under that perspective.

- Paragraph 29
  - Options 2.2 and 2.3 were not recommended:
    - Option 2.2 rejected because no mutual claim/liability between supplier and factor while the discount is treated as interest.
    - Option 2.3 viewed as too complex due to three-way partitioning of the discount and requiring revision of trade data, increasing compiler burden.

- Paragraph 30
  - Most drafting team members supported Option 3.1 — treating recourse factoring as non-recourse factoring:
    - Main argument: recourse is not an actual liability of the supplier and is activated only in rare non-payment cases; recourse is therefore a guarantee becoming an actual claim only when called.
    - Reserve viewed as collateral held by the factor and treated as a liability of the factor vis-à-vis the supplier.
    - Direct collection by the factor supports view of a true sale of claims from supplier to factor.

- Paragraph 31
  - One drafting team member favored treating recourse following economic ownership:
    - Risks essentially transferred to the factor except for invoices covered by the recourse liability, which remain economically owned by the supplier.
    - If (i) debtor pays in full, supplier receives residual cash for residual accounts receivable; if (ii) debtor defaults, the receivable is written off in supplier’s and debtor’s books (not factor’s) for the recourse liability.
    - When recourse > reserve, the difference should be treated as a cash advance and recorded as other accounts payable by the supplier to the factor.
    - At end of recourse period, if bad debt > reserve then supplier pays difference (up to recourse liability) and reserve to factor; if reserve > bad debt then supplier receives the difference.

- Paragraph 32
  - Strong support for making reclassification via recording of transactions rather than other changes affecting positions.
  - Reclassification seen as repayment of a trade credit and creation of a new liability; part of contract that remains under supplier’s economic ownership should be reclassified to other accounts receivable via transactions.
  - Same judgement applies to recourse when it becomes an actual claim on the supplier.

- Paragraph 33 (FITT consultation)
  - FITT consultation supported rejecting Option 1 and providing additional guidance.
  - Four members preferred Option 2.1 for non-recourse factoring and suggested clear practical guidance in updated BPM Compilation Guide.
  - One member supported Option 2.3 with modification (interest paid by supplier, not debtor).
  - FITT members mostly supported reclassification via transactions rather than other changes affecting positions; one member had no clear preference.
  - For recourse factoring: Option 3.1 supported by three FITT members commenting on the GN; Option 3.3 supported by one member.

- Paragraph 34
  - One FITT member supported Option 2.3 (factoring classified as a loan to the supplier) and disagreed with classifying factoring contracts as other accounts receivable/payable:
    - Factor (financial institution) provides credit to supplier, a non-tradable instrument classified as loans, with fee and implicit interest (implicit interest being most important).
    - Concern: classification under other accounts receivable/payable would exclude factoring from credit aggregates of other financial corporations and underestimate financial sector credit to the economy — relevant for macro-stability analysis and non-bank sector credit measurement.

- Paragraph 35
  - In addition to recourse/non-recourse treatment clarification, other trade finance instruments should be elaborated on in updated manuals or compilation guides. Examples referenced in BOPCOM 17/21.

### Key policy and compilation recommendations
- Reject Option 1 due to insufficient current guidance and inconsistency with business practices and accounting standards.
- Prefer treating factor’s discount as income/sale (financial intermediation services) rather than revaluation or interest in many cases.
- For non-recourse factoring, the drafting team recommended Option 2.1 (claim against debtor classified as other accounts payable) as the preferred treatment, while acknowledging alternative views supporting Option 2.4 or Option 2.3 among members.
- For recourse factoring, the drafting team predominantly favored Option 3.1 (treat like non-recourse factoring), but an alternative treatment based on economic ownership (Option 3.3 style logic) was advanced by one member.
- Reclassification from trade credit to loans/other accounts receivable should be recorded as transactions in the financial account rather than as other changes affecting positions.
- Update BPM/Compilation Guide guidance with clear practical instructions on factoring and related supply-chain finance instruments.

### Questions for discussion (numbered exactly as in the source)
- 1) Do you agree with the GN proposal on rejecting Option 1 and instead consider other options discussed in the GN for the statistical treatment of the non-recourse and the recourse factoring?
- 2) If the answer to question 1 is yes, which option do you prefer for the statistical treatment of non-recourse factoring (Options 2.1—2.4)?
- 3) If the answer to question 1 is yes, which option do you prefer for the treatment of recourse factoring (Options 3.1—3.3)?
- 4) Do you agree that the instrument reclassification from trade credit to loans/other accounts receivable should be recorded as a transaction in the financial account rather than as other changes affecting positions?
- 5) Do you consider that the other types of supply chain finance need further guidance in BPM7 or its Compilation Guide?

### Relevant manual and guide excerpts summarized (annex references)
- BPM6 paragraphs referenced:
  - 3.82: For loans, deposits, and other accounts receivable/payable sold at a discount, transaction values recorded in the financial account may differ from nominal values in the IIP; differences recorded as valuation changes in other changes in financial assets and liabilities.
  - 3.86–3.87: Loan, deposit, and accounts receivable/payable positions recorded at nominal value; nominal valuation influenced by data availability and symmetry concerns; nominal values useful for legal liability representation; nonperforming loans information recommended as memorandum.
  - 5.72: Trade credit and advances exclude loans to finance trade provided by a unit other than the supplier; when supplier sells trade claims to a factor, claim is reclassified from trade credit to accounts receivable/payable.
  - 9.33: Nominal valuation for nonnegotiable instruments; when transactions occur they are valued at market prices and seller/buyer record other price changes to reconcile transaction and nominal values.
- IMF Compilation Guide and MFS excerpts reiterate nominal valuation for nonnegotiable instruments and treatment of sales at discount (other price changes recorded when transaction values differ from nominal IIP values).
- MFS and SNA excerpts clarify classification and characteristics of bills of exchange, acceptances, and conditions under which acceptances are classified as loans, debt securities, or trade credit.

*Source: Drafting team and FITT consultation in the Guidance Note on factoring transactions, IMF.*

### 3.144 A less obvious mingling of transactions occurs when the provision of an asset and the related

### f14-treatment-of-factoring-transactions - 3.144 A less obvious mingling of transactions occurs when the provision of an asset and the related

### Timing mismatches, accrued interest, and valuation (3.144)
- When the provision of an asset and the related money payment or payments do not take place simultaneously, and the time gap becomes unusually long and the amount of trade credit extended is very large, the conclusion may be that implicitly an interest fee has been charged.
- In such extreme cases, the actual payment or payments should be adjusted for accrued interest in order to arrive at the correct value of the asset transferred.
- Such adjustments are not recommended for normal trade credit.
- Attribution: ECB (2019), MANUAL ON MFI BALANCE SHEET STATISTICS (as cited in the publication).

### Factoring and project finance (4.3.9.15)
- Definition and core mechanics:
  - Factoring: an MFI purchases accounts receivable (invoices) from a third party (the factoring client/firm).
  - The factoring company buys receivables at a price lower than face value, effectively charging fees and interest.
  - The factoring company manages the sales ledger and collection; customers send payments directly to the factoring company.
  - Finance is extended for the duration of the trade debt.
- Recording and classification:
  - MFIs acting as factoring companies should record their factoring operations as loans.
  - Factoring may be referred to as trade receivables or invoice discounting; guidance applies only where the factoring company is the reporting MFI that purchases accounts receivable from a third party.
  - Forfaiting operations are treated analogously to non‑recourse factoring.
- Project finance:
  - Assets arising from project finance are recorded as loans.
  - Project finance refers to loans to entities created to finance and/or operate physical assets where primary repayment is from income generated by the assets rather than the broader enterprise.

### Non‑recourse vs recourse factoring; counterparty and valuation guidance
- Risk allocation:
  - Non‑recourse factoring: the factoring company (MFI) assumes the full risk of default by the customer.
  - Recourse factoring: the factoring client (firm) retains the risk; the factoring company can hold the factoring client liable if a debtor is unable to pay.
- Cash flows and settlements:
  - In recourse factoring the factoring company buys receivables at a discount retained as collateral; upon customer payment the factoring company transmits proceeds net of advances and fees/interest to the factoring client.
  - In non‑recourse factoring the factoring company assumes default risk and charges fees and interest immediately to the factoring client, who receives the trade credit net of those charges.
- Counterparty sector classification:
  - In non‑recourse factoring the customers are the counterparty because the factoring company assumes the risk.
  - In recourse factoring the ultimate debtor is the factoring client (firm), who should be the counterparty of the loan.
- Valuation rule:
  - Factoring operations should be recorded at the value of the invoice less the discount retained as collateral (as per example A), rather than at fair value permitted under some international accounting standards.
- Fees and pricing:
  - Fees and interest charges of non‑recourse factoring are usually higher than those of recourse factoring due to the different risk profile and service provided.

### Relevant IFRS 9 derecognition and measurement provisions (selected)
- Derecognition (3.2.3–3.2.6):
  - An entity shall derecognise a financial asset only when: (a) contractual rights to cash flows expire, or (b) it transfers the financial asset and the transfer qualifies for derecognition under specified conditions.
  - A transfer occurs if the entity transfers contractual rights to receive cash flows, or retains those rights but assumes an obligation to pay cash flows to eventual recipients under conditions in paragraph 3.2.5.
  - Conditions for treating a retained-rights arrangement as a transfer include: (a) no obligation to pay eventual recipients unless equivalent amounts are collected from the original asset (short‑term advances with full recovery plus accrued interest at market rates do not violate this), (b) prohibition on selling/pledging the original asset other than as security to eventual recipients, and (c) obligation to remit collected cash flows without material delay and not to reinvest except in cash or cash equivalents for short settlement periods.
  - Evaluation of retained risks and rewards: if substantially all risks and rewards are transferred, derecognise; if retained, continue recognition; if neither, determine control and continuing involvement rules apply.
- Measurement at amortised cost (4.1.2):
  - A financial asset shall be measured at amortised cost if: (a) held within a business model to collect contractual cash flows, and (b) contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest.
- Initial measurement and interest recognition (5.1.1; 5.4.1–5.4.2):
  - Except for trade receivables within paragraph 5.1.3, at initial recognition measure financial assets/liabilities at fair value plus/minus transaction costs when not at fair value through profit or loss.
  - Interest revenue shall be calculated using the effective interest method, applying the effective interest rate to the gross carrying amount except for purchased/originated credit‑impaired assets and subsequently credit‑impaired assets (special rules apply).
  - If credit risk later improves such that the asset is no longer credit‑impaired, interest revenue calculation reverts to applying the effective interest rate to the gross carrying amount.
- Effective interest rate definition:
  - The rate that exactly discounts estimated future cash payments/receipts through the expected life to the gross carrying amount or amortised cost; estimates consider contractual terms (prepayment, extension, call options) but shall not consider expected credit losses; calculation includes fees, transaction costs, premiums, discounts.

### Factoring terminology and framing (Annex II)
- Receivables finance and factoring positioning:
  - Trade finance is an umbrella of products to bridge trade cycle funding gaps; factoring is in Receivables Finance where suppliers exchange trade credit for early discounted payment by selling invoices to a factor.
  - A factor can be a multinational bank trade finance division, local commercial bank, or a non‑bank lender focused on trade finance.
- Two primary types of factoring:
  - Non‑recourse: factor assumes full non‑payment risk and charges a higher discount; creditor receives full amount net of charges immediately.
  - Recourse: factor retains recourse to the creditor; initially pays a percentage and retains a reserve (recourse liability) until collection; residual reserve net of discount passes to creditor after collection; if debtor defaults beyond the reserve, creditor may have to repay or "buy back the invoices."
- Terminology table (selected definitions preserved):
  - Supplier (buyer, creditor, exporter): Unit that provides goods, services, or implements work in progress to debtor.
  - Debtor (importer, purchaser): Unit that purchases goods, services or order works from supplier.
  - Bill: A non-negotiable document that confirms the liability of Debtor against the supplier for provision of goods, services or works in progress.
  - Factor: Financial institution that purchases bill from supplier.
  - Reserve: Amount of invoice under recourse factoring held until full repayment by the debtor.
  - Recourse: Amount for which the supplier retains the risk of uncollectability under recourse factoring.
  - Non‑recourse factoring: Agreement where the factor takes all benefits and risks; supplier has no obligation regarding the bill.
  - Recourse factoring: Agreement where factor retains full or partial recourse claim on supplier if debtor fails to pay.
  - Nominal value: Outstanding amount the debtor owes to the supplier (to factor after the purchase), composed of outstanding principal including any accrued nominal interest.
  - Discount: The difference between nominal principal value and the transaction value in factoring transactions.

### Policy options and discussion on recording the discount, instrument, recourse, and reserve (Annex III)
- Two overarching questions guide options:
  1. Whether to maintain the status quo (Option 1 vs Option 2 family).
  2. How to treat recourse factoring (Option 3 discussed separately).
- Option 1: Keep status quo and add clarifications
  - Clarify that paragraph 3.82 regarding “other accounts receivable/payable sold at a discount” applies to factoring.
  - Under current BPM6 guidance: (a) reclassify sold claims as other accounts receivable/payable; (b) value stocks at face value (minus any repayment on invoices plus any other nominal/contractual interest/fee receivable from buyer except the discount); and (c) record the discount as valuation changes (in the IIP) rather than as income in the current account.
  - In BPM7: add a paragraph giving more detail on classification and valuation of claims sold by factoring transactions; recommend same in SNA update and MFS.
  - If Option 1 chosen, imputation for factors’ assets in their balance sheet should be made.
- Option 2: Treat the discount as a transaction (income/sale) in external accounts and SNA
  - Add guidance that the discount is recorded as income/sale in BPM/SNA.
  - Recognize accounting differences between supplier and factor and apply statistical techniques to reflect fees/interest either immediately or accrued over maturity.
  - Sub‑options:
    - Option 2.1:
      - Factor provides a discounting service similar to cheque discounting/payment facilitation.
      - Claim classified as other receivables/payables.
      - Income treated as fee rather than interest by both factor and supplier.
      - Factor’s claim is valued at face value immediately after transaction.
    - Option 2.2:
      - Factor seen as providing funds to supplier; income treated as interest.
      - Same as Option 2.1 except interest recorded in factor’s accounts against the supplier.
      - Modality: split observed discount into (i) a normal/market discount treated as indicated and (ii) a supplementary discount treated as a purchase of service by the supplier from the factor.
      - Stocks valued at discounted amount plus interest/fee accrued.
    - Option 2.3:
      - Factoring treated as a trilateral arrangement implying indirect financing of the debtor by the factor; factoring instruments reclassified as loans.
      - Factor income treated as interest whose source is the debtor.
      - Possible split of observed discount into (i) normal discount and (ii) supplementary discount treated as a purchase of service by the supplier.
      - Value of goods provided by supplier decreased by the discount (i) as a commercial rebate; matching interest payable by the debtor.
      - Factor’s claim valued at its discounted value.
      - FISIM applicability: since FISIM is applicable to factored claims, the discount largely recorded as sale of service by the factor to the debtor; reclassification implemented as a financial account transaction.
    - Option 2.4:
      - Compromise between Options 2.1 and 2.3.
      - Discount recorded as a fee/service paid by supplier to factor (as in 2.1).
      - Factor would have a loan against the debtor recorded as a transaction (as in 2.3) at face value.
      - Supplier deemed to request factor to extend a zero‑interest rate to the debtor against a fee payment; loans would not carry interest and therefore not be subject to FISIM.
      - Stocks valued at face value of invoice.
- Issue 2 (preview): How recourse factoring should be treated
  - The document signals a separate discussion (Option 3) and calculations provided separately to present treatments under sub‑options and to model different sizes of recourse and reserve.

*Source: IMF content unit f14-treatment-of-factoring-transactions (excerpts and annexes).*

### 4.      Option 3: Recourse factoring agreements include additional conditions, which may have

### 4.      Option 3: Recourse factoring agreements include additional conditions, which may have

### Overview of Option 3: key issues and alternative treatments
- Option 3 highlights additional conditions in recourse factoring agreements that affect treatment; the most important issue is the treatment of recourse, and a minor issue is treatment of the reserve.
- Based on different treatment of recourse and reserve, three alternative solutions are presented: Option 3.1, Option 3.2, Option 3.3.
- Note in source text: “Ho wever, n o te th at th is so lutio n en tails severe p ractical d ifficulties as th e sup p lier h as p ro vided  g o ods/services prior to the factoring transaction. The value of the  goods/services and output would have to be  changed in retrospect. Th is co uld  en tail severe d iscrep ancies.”

### Option 3.1 — Recourse treated as guarantee; reserve treated as collateral
- Concept:
  - The recourse is seen as a guarantee provided by supplier in rare cases when the debtor fails to meet its obligations.
  - Under this option the same classification of the instrument and the discount as in Option 2 should be applied.
  - The recourse should be treated as a guarantee until it is called.
  - The reserve is seen as a collateral and should be treated based on GN 10 outcomes.
- Numerical example (invoice value 100; Discount 10; Reserve 20; Recourse 100):
  - Reclassification via transactions converts trade credit to other accounts receivable = 100.
  - Transaction entries:
    - Factoring fee = 10 (supplier import -10).
    - Other accounts receivable (transferred amount of invoice) = 100 (factor asset; supplier liability -100).
    - Other accounts receivable (collateral) = 20 (supplier asset; factor liability 20).
    - Cash to supplier = 70 (cash -70 from factor; supplier +70).
  - Positions after transaction (from point of view, against OA):
    - Factor D 100
    - Supplier F 20
    - Debtor none
    - Liabilities: Factor S 20; Debtor F 100
  - Full repayment outcomes:
    - Other accounts receivable (invoice) -100; Other accounts receivable (collateral) -20; Cash 80 (factor), 20 (supplier), -100 (debtor) as presented.
  - Full non-payment outcomes produce reclassification entries where supplier trade credit returns to supplier and collateral entries reverse (see example flows preserving the numeric entries).

### Option 3.2 — Recourse treated as financing to the supplier (loan)
- Concept:
  - Recourse factoring is seen as financing of supplier. A loan is recognized by factor and supplier, and interest is calculated on this loan.
  - FISIM calculation should apply to the interest.
  - There is no change in ownership of the invoice; the claims between supplier and debtor remain as trade credit.
  - The loan is valued at funds provided cost plus interest accrued.
  - The reserve and the recourse do not have any recording in macroeconomic accounts.
- Numerical example (invoice value 100; Discount 10; Normal interest rate 5%; Reserve 20; Recourse 50):
  - Transactions over the period:
    - FISIM 5.5 (factor export 5.5; debtor import -5.5).
    - Interest (against supplier) 4.5 (factor export 4.5; supplier import -4.5).
    - Loans recorded: Loans 80 (factor asset); Cash -70; Net loan funding entries shown in example.
  - Positions after transactions (from point of view, against OA):
    - Factor S (Loan) 80 (asset)
    - Supplier D 100
    - Liabilities: Supplier F (Loan) 80; Debtor S 100
  - Full repayment and full non-payment scenarios preserve loan balances: loan -80, cash 80 on repayment; non-payment shows loans remain with factor until other changes.

### Option 3.3 — Partial true sale: divide invoice between sold and retained (recourse) parts
- Concept:
  - Recognize true sale only for part of invoice equal to amount not covered by recourse. The recourse part stays under economic ownership of supplier.
  - For amounts transferred to the factor, apply same treatment as in sub-options under Option 2.
  - If the amount of recourse is greater than the reserve, the difference should be recorded as temporary claim against the supplier (other accounts receivable).
- Numerical example (invoice value 100; Discount 10; Reserve 20; Recourse 45; Difference between Reserve and Recourse (cash advance) 25):
  - Pre-transaction: Supplier D 100; Debtor S 100 (trade credit).
  - Reclassification: trade credit converted to other accounts receivable = 100.
  - Transaction entries:
    - Fee 10 (supplier import -10).
    - Other accounts receivable plus fee 55 (factor asset; supplier liability -55).
    - Other accounts receivable (against the supplier) 25 (temporary claim recorded).
    - Cash -70 (factor cash outflow), supplier receives 70.
  - Structure implies three parts of invoice:
    - Part sold to factor (amount reflected in factor D and supplier liability entries).
    - Cash advance equal to difference between reserve and recourse = 25 recorded as other accounts receivable against the supplier.
    - Reserve = 20 treated per the example entries.
  - Subsequent repayment/non-payment and bankruptcy treatments follow the example pattern, with the recourse portion retained by supplier as economic owner.

### Practical considerations and implications
- The source notes severe practical difficulties with solutions that would require changing values of goods/services and output in retrospect if supplier had provided goods/services prior to factoring.
- Choice among Options 3.1, 3.2, and 3.3 affects:
  - Whether recourse is treated as guarantee (off-balance contingent until called), loan (financial instrument with FISIM/interest implications), or retained economic ownership (partial true sale).
  - Recording of reserves: as collateral (Option 3.1), not recorded in macroeconomic accounts (Option 3.2), or allocated across parts (Option 3.3).
  - Whether FISIM applies (Option 3.2 and some Option 2 analogs) or fees are recorded as current account items (Options 2 and parts of Option 3).

*IMF — BPM6 FITT: Annex IV numerical examples and Option 3 (treatment of recourse factoring agreements).*

### 4. Positions After Transaction

### f14-treatment-of-factoring-transactions — 4. Positions After Transaction

### Positions after transaction and scenario outcomes
- The chapter presents whom-to-whom positions for assets and liabilities immediately after factoring transactions:
  - Initial listed positions (from point of view / against OA):
    - Factor D 55
    - Supplier D 45
    - Factor S 25
    - Debtor S 45
    - Debtor F 55
    - Supplier F 25
- Scenario: 5.1 Full Repayment (illustrative account changes)
  - Other accounts receivable: Factor -55; Supplier -45; aggregate -100
  - Other accounts receivable (against the supplier): -25
  - Cash movements: Factor +80; Supplier +20; Debtor -100
  - Financial account entries: NAFA NIL for Factor, Supplier, Debtor
- Scenario: 5.2 Full Non-Payment (illustrative account changes)
  - Other accounts receivable against debtor recorded (amounts shown but not numerically aggregated in the extract)
  - Other accounts receivable against supplier: -25
  - Cash: Factor +25; Supplier -25
  - Financial account entries: NAFA NIL for Factor, Supplier, Debtor
- Scenario: Bankruptcy of debtor (illustrative whom-to-whom changes)
  - After transactions and other changes P1:
    - Factor D (OA) 55 remains then -55 other changes → 0
    - Supplier D (OA) 45 remains then -45 other changes → 0
    - Debtor F (OA) 55 then -55 → 0
    - Debtor S (OA) 45 then -45 → 0
- Scenario: 5.2 Non-Payment 20 Equal to Reserve, then Write-Off
  - Factor: Other accounts receivable against debtor -55; other accounts receivable against supplier -25; Cash +80 then -80 in write-off sequence
  - Resulting whom-to-whom P1 positions:
    - Factor S (OA) 25 with transaction -25
    - Factor D (OA) 55 with transaction -55 → 0
    - Supplier D (OA) 45 with transaction -25 and other change +20
    - Debtor S (OA) 45 with transaction -25 and other change +20
    - Supplier F (OA) 25 with transaction -25 → 0
    - Debtor F (OA) 55 with transaction -55 → 0
  - Bankruptcy of debtor yields Supplier D(OA) 20 then -20 → 0; Debtor S (OA) 20 then -20 → 0
- Scenario: 5.3 Non-Payment 15, then Write-Off
  - Factor: Other accounts receivable against debtor -55 then -30 aggregated to -85; other accounts receivable against supplier -25; Cash +80 then +5 then -85 in sequence
  - Whom-to-whom P1 positions:
    - Factor S (OA) 25 with transaction -25
    - Factor D (OA) 55 with transaction -55 → 0
    - Supplier D (OA) 45 with transaction -30 and other change +15
    - Debtor F (OA) 55 with transaction -55 → 0
    - Supplier F (OA) 25 with transaction -25 → 0
    - Debtor S (OA) 45 with transaction -30 and other change +15
  - Bankruptcy of debtor yields Supplier D(OA) 15 then -15 → 0; Debtor S (OA) 15 then -15 → 0

### Annex V — Business accounting: main findings on recording practices
- Factoring is recorded differently in factor’s, supplier’s, and debtor’s accounting books; debtor generally continues to show accounts payable with no change due to factoring.
- Non-recourse factoring:
  - Recorded as a true sale in both factor’s and supplier’s balance sheets.
  - Supplier derecognizes the accounts receivable and records sale loss immediately.
  - Factor recognizes a claim equal to cash paid; the discount receivable is accrued over the instrument’s life.
  - Initial recognition of the purchased instrument equals the amount paid; effective interest is calculated based on future determined flows; IFRS requires amortized effective interest (IFRS 9 5.4.1).
- General IFRS guidance:
  - Financial assets can be measured at amortised cost if conditions in IFRS 9 4.1.2 are met: (a) held within a business model to collect contractual cash flows; and (b) contractual terms give rise to cash flows that are solely payments of principal and interest.
  - Supplier records a loss immediately upon derecognition.
- Recourse factoring differs from non-recourse:
  - Key question is whether a true sale has occurred; if not, a loan should be recognized from factor to supplier.
  - Under recourse, the claim on debtor may remain on supplier’s balance sheet.
- Derecognition criteria are described in IFRS 3.2.3–3.2.6 and decision trees are referenced for application.
- Jurisdictional differences in practice:
  - Korean accounting standards require recording recourse factoring as a loan (citation in source).
  - US GAAP (ASC 860 paragraph 10-40-5; FAS 140 paragraphs 9 and 113) focuses on contract conditions and recommends derecognition if debtor creditability is not questionable.

### Annex VI — Discussion: recourse factoring vs non-recourse factoring (two views)
- View One: Factoring with recourse generally meets the true sale criteria
  - Arguments:
    - Factor directly collects all cash flows from the debtor even if refunds to supplier occur.
    - Supplier’s recourse claim is contingent, reflecting that debtor defaults are rare.
    - Risks and rewards are mostly transferred to factor; guarantees by supplier are not viewed as present obligations.
    - Cash reserves held by factor should be recognized as a claim of the supplier against the factor.
    - If recourse liability exceeds reserve and is called, refund by supplier analyzed as reacquisition/repurchase of claim.
- View Two: Factoring with recourse requires recording a true sale only for the amount net of the “recourse liability”
  - Arguments:
    - Supplier retains economic ownership and risk of uncollectability until maturity for the portion equivalent to recourse liability.
    - In absence of default, debtor pays factor and factor pays reserve residual to supplier for remaining invoices.
    - If recourse liability differs from reserve held, residual treated as cash collateral as asset or liability of supplier vis-à-vis factor.
    - Full recourse effectively means factor provides a loan to supplier for the whole amount.
    - ECB manual on MFI statistics treats recourse factoring as a loan to the supplier.
- Policy implication:
  - Flexibility may be required where accounting or legal frameworks assimilate recourse factoring to collateralized lending.
  - Cross-country consistency requires homogeneous treatment across parties; guidance by SNA and BPM for specific country cases is recommended.

### Annex VII — Classification of the discount and the instrument: key conclusions
- Consensus: the discount should be reflected in macroeconomic accounts as output of financial intermediary (factoring service).
- The discount conceptually consists of two components: a factoring fee and interest for funds provided in advance.
  - Accounting standards generally require using the effective rate to record and accrue income as interest in the factor’s income statement.
  - Supplier may record the discount as fee or sale loss immediately.
- When explicit fee/interest cannot be separated, one category should be chosen (fee or interest); guidance suggests classifying the discount as fee/interest.
- Implications for whom-to-whom recording and timing:
  - If the debtor is considered the ultimate financier, change in factor’s position against debtor should be recorded in financial accounts (whom-to-whom) rather than as other changes in volume.
  - 2008 SNA paragraph 3.144 conventionally does not recognize implicit financing in short-term trade credit unless long term; factoring reveals an explicit financing element reflected as a “discount”.
- Practical recording tensions:
  - Supplier recognizes full discount as expense upon factoring; factor accrues interest over life of instrument (effective interest method).
  - Statistical corrections may be needed to adjust timing and to reclassify factor income between interest and fee to reconcile factor and supplier accounts and improve cross-country consistency.
- BPM6 paragraph 5.72 current recommendation:
  - Record factoring claims as Other accounts payable/receivable after reclassification from trade credits; from debtor’s perspective this is a change in counterpart only.
- Debates and counterarguments:
  - Some view factored claims as ineligible for classification as other receivables (AF.89) per ESA 2010 definitions and 2008 SNA paragraph 11.127 concerns.
  - Analogies with financial leasing and trade bills support treating factored claims as financial claims rather than simple timing differences.
- FISIM consideration:
  - If interest flows are recorded between factor and supplier despite no claim, such income would be treated as production of service; FISIM calculations and sector allocation implications must be considered.

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_Source: https://www.imf.org/-/media/files/data/statistics/bpm6/fitt/f14-treatment-of-factoring-transactions.pdf_