ASU 2016-15 and GAAP Treatment of Securitization-Related Cash Flows

Catching Up to the Fast-Moving Financial Sector

Cecil W. Jackson, PhD, CPA (Inactive), and David M. Jackson, JD

The securitization of trade receivables is a multibillion-dollar sector, and it is growing. It is vitally important that U.S. GAAP correctly reflect the economics of these transactions. This article argues that, in essence, cash inflows resulting from a transferor’s beneficial interest in the securitization of its trade receivables are inflows from operating activities. Importantly, and for very good reason, investors generally regard cash inflows from operating activities more highly than cash inflows from investing activities.