The following notes for three fictional companies represent what analysts may see in practice.

Carsini Company, December 31, 20X2
Note No. 4—Trade Notes Receivable Discounted with Banks The Company regularly discounts trade notes receivable on a full recourse basis with banks. The discounted notes represent contingent liabilities. The weighted average interest rates on the trade notes receivable discounted were 6.0% and 5.0% as of December 31, 20X1 and 20X2, respectively.

Falk Corporation, December 31, 20X2

Note No. 6—Accounts Receivables

Factoring Agreement The Corporation factors substantially all of its trade accounts receivable. Under the terms of the agreement, the factor remits invoiced amounts to the Corporation near the due dates of the factored invoices. The Corporation does not borrow funds from its factor or take advances against its factored receivables balances. Accounts are factored without recourse as to credit losses but with recourse as to returns and allowances. The Corporation paid factoring fees of $1,501,000 (20X2), $1,223,000 (20X1), and $1,077,000 (20X0).

Harris, Inc., December 31, 20X2

Note C—Accounts Receivable Financing

On June 30, 20X2, the Company entered into a one-year agreement to sell a percentage ownership interest in a defined pool of the Company’s trade accounts receivable with limited recourse. The Company received $150.0 million from the sale. Generally, an undivided interest in new accounts receivable will be sold daily as existing accounts receivable are collected to maintain the participation interest at $150.0 million. Such accounts receivable sold are not included in the accompanying consolidated balance sheet at December 31, 20X2. The Corporation continues to do the accounting and collecting for the transferred receivables. An allowance for credit losses has been retained on the participation interest sold based on estimates of the Corporation’s risk of credit loss from its obligation under the recourse provisions. The total cost of the program in 20X2 was $4.1 million. 

Required:

How do the three companies record the transfer of their receivables—that is, as a sale or borrowing? Is their accounting treatment consistent with the economics of the transactions? Explain.