CERTYNEX IFRS ACADEMY

Prisme SA has sold a portfolio of receivables and derecognised it. As part of the sale, it gave the buyer a first-loss guarantee covering losses up to 5% of the portfolio; it also gave the usual representations that there is no fraud (case facts). Which of these items creates continuing involvement in the transferred assets?

The usual no-fraud representations, which are contractual commitments inherent in the assets sold.

Neither: once the receivables are derecognised, the entity has no further involvement in the transferred assets.

Both, since any commitment given to the buyer at the time of the sale is continuing involvement.

The first-loss guarantee, a new contractual obligation on the transferred assets.