A transfer of assets by a company in financial difficulty is considered a sale if:
I.the transfer includes a recourse provision allowing the buyer to return the asset.
II.the transferee obtains the right to pledge or exchange the transferred assets.
III.the transferred assets have been isolated from the transferor.
IV.the transferor does not maintain effective control over the transferred assets.
A)I,II,and IV
B)Both I and III
C)Both I and II
D)II,III,and IV

Question

Quizplus · Accepted Answer

A transfer of assets is considered a sale if the transferee obtains the right to pledge or exchange the transferred assets (II), the transferred assets have been isolated from the transferor (III), and the transferor does not maintain effective control over the transferred assets (IV). A recourse provision (I) would imply that the transferor maintains some control, contradicting the criteria for a sale.

A Transfer of Assets by a Company in Financial Difficulty