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Bill Discounting With Recourse

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This query is : Resolved

Prateek (Querist)
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25 November 2010 What is the accounting treatment if a company discounts its bills (i.e. debtors) with bank, with recourse i.e. the company has a liability to pay money to the bank in case the debtor fails to pay the bank.

Issue involved:
Should the treatment involve knocking off the debtors from books against the amount received from bank and a contingent liability should be recognised
or
should we continue to keep debtors in books and also recognise a corresponding liability of bank.

Please provide suggestion in the light of either indian GAAP or IFRS

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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25 November 2010 Bill discounting is the time being loan arrangement only, this will not clear the Debotors. because even you are discounting the bill the actual debtor has to pay the amount to you only not direct to bank, so we need to create the liability against the bill discountng and maintain separate ledger

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