Here are some examples to learn which types of financial instruments/transactions qualify for accounting for a pass-through arrangement. An explanation of a pass-through arrangement and the three conditions a vehicle has to meet in qualifying for a pass-through are provided in ‘Pass-through arrangements‘ If the originator/transferor meets these three conditions the assets transferred are derecognised by the transferor.
Transfer of disproportionate share in pass-through
Can the transfer of a disproportionate share of the cash flows from a loan meet the conditions for a pass-through arrangement?
Entity M originates a five-year interest-bearing loan of 100. M then enters into an agreement with entity N in which, in exchange for a cash payment of 85, M agrees to … Read more