invoice and the advance rates serves to protect factors against any losses and to ensure coverage for their fees. Once the invoice is paid, the factor gives the difference between the face value, advance amount and fees back to the business in the form of a factoring rebate. Reserve account Whereas the difference between the invoice face value and the advance serves as a reserve for a specific invoice, many factors also hold an ongoing reserve account which serves to further reduce the risk for the factoring company. This reserve account is typically 10–15% of the seller's credit line, but not all factoring companies hold reserve accounts. Long-term contracts and minimums While factoring fees and terms range widely, many factoring companies will have monthly minimums and require a long-term contract as a measure to guarantee a profitable relationship. Although shorter contract periods are now becoming more common, contracts and monthly minimums are typical with "whole ledger" factoring, which entails factoring all of a company's invoices or all of the company's invoices from a particular debtor. Spot factoring Spot factoring, or single invoice discounting, is an alternative to "whole ledger" and allows a company to factor a single invoice. The added flexibility for the business, and lack of predictable volume and monthly minimums for factoring providers means that spot factoring transactions usually carry a cost premium. Treatment under GAAP In the United States, under the Generally Accepted Accounting Principles (GAAP), receivables are considered "sold", under FASB ASC 860-10 (or under Statement of Financial Accounting Standards No. 140, paragraph 112), when the buyer has "no recourse". This means that the factor cannot obtain additional payments from the seller if the purchased account does not collect due solely to the financial inability to pay of the account debtor; however, "quality recourse" still exists. In other words, the nonrecourse factor who assumes credit risk bears the credit loss and incurs bad debt if a purchased account does not collect due solely to financial inability of the account debtor to pay. Moreover, to treat the transaction as a sale under GAAP, the seller's monetary liability under any "recourse" provision must be readily estimated at the time of the sale. Otherwise, the financial transaction is treated as a secured loan, with the receivables used as collateral. When a nonrecourse transaction takes place, the accounts receivable balance is removed from the statement of financial position. The corresponding