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Under structured payable programs, the reporting entity arranges for its vendors to have the option to factor their receivables (i.e., the reporting entity's payables) to a bank. The balance sheet classification of the reporting entity's payable depends on the economic substance of the arrangement. See FSP 11.3.1.5 for additional discussion of balance sheet classification of structured payables arrangements.
If the economic substance of the trade payables has changed as a consequence of implementing a structured vendor payable program, an in-substance refinancing will be deemed to have occurred. As a result, the affected trade payable balances should be reclassified to debt on the reporting entity’s balance sheet. In this circumstance, the SEC staff’s position (which is consistent with the view expressed concerning floor plan financing programs discussed in FSP 6.9.12) is that a reporting entity’s statement of cash flows should reflect (impute) an operating cash outflow and financing cash inflow related to the affected trade payable balances. A financing cash outflow should be reflected upon payment to the bank and settlement of the obligation.
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