In the case of trade finance (factoring) contract with multiple accounts receivable (corresponding multiple debtors) of which only single one is past due, should the carrying amount be reported (in the table F 07.00 Financial assets subject to impairment that are past due or impaired) at the single debtor (single account receivable) level that is actually past due or general contract level? Should it be differently reported in the case of factoring contract with the recourse right and without the recourse right?
The ITS (Regulation (EU) No. 680/2014) Annex V. Part 2, paragraph 48 refers to the reporting of the whole amounts of past due assets. However it is not clear at what level the total amount should be calculated in case of factoring contract. In the case of factoring without recourse right financial institutions evaluate the quality and performance of every single debtor corresponding to their accounts receivable, whereas in the case of factoring with recourse right financial institutions evaluate the quality and performance of a client (corresponding general contract) that has a recourse obligation to cover the exposure ultimately. It would be reasonable to apply the same conception in case of reporting past due assets as well.
For the template 7.1 the ITS (Regulation (EU) No. 680/2014) Annex V. Part 2, paragraph 94 states that “past-due instruments shall be allocated to the corresponding past-due buckets on the basis of their individual situation.
In case of factoring contract, assets past due shall be reported on the basis of the risk borne by the factor i.e.:
- For factoring with recourse, at the level of each factoring contract with the client (seller of the receivables);
- For factoring without recourse, at the level of each invoice against the final debtor as the institution cannot recourse against its client.