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Chapter 3

4.4 Derecognition of financial assets

As per IAS 39 Financial instruments: Recognition and Measurement, only
derecognise a financial asset if:

 the contractual rights to the cash flows expire

 the RISKS and REWARDS are transferred.

Examinable scenario – factoring

(1) Entity sells receivables

to factor.

(2) Do risk and rewards
transfer to factor? See
next page.

(3) Factor pays entity lump
sum upfront.

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