Deconsolidated factoring

Deconsolidated factoring (or deconsolidating factoring ) is a form of factoring in which the factor assumes most of the risks associated with the assigned invoices, particularly the risk of non-payment. The receivables can then be removed from the company’s balance sheet.

Example

A group transfers €2 million in accounts receivable through deconsolidated factoring. These receivables are removed from its accounts receivable balance, and its net debt decreases at year-end.

Why It’s Important

It improves the financial ratios presented to banks and investors. The accounting requirements are strict and must be approved by a certified public accountant or an independent auditor.

For more information: The Credit Management Guide.

See also: factoring, factor, accounts receivable.