Accounting For Repurchase Agreements Gaap

« The new guidelines will address investor concerns about the distinction made in GAAP between repurchase transactions that simultaneously settle the maturity of transferred financial assets and those that charge at any time before maturity, » FASB President Russell Golden said in a statement. On January 15, 2013, the FASB adopted a proposal for ASU1, which would amend the U.S. GAAP by requiring repurchase contracts (« rest »2) that meet the criteria of secured credit accounting, as guaranteed obligations and not as sales with forward redemption contracts, including rest that would be settled at maturity of the transferred assets.3 The proposed ASU 6 In April 20111 , the FASB updated accounting standards No. 2011-03 , the audit of the effective control of pension transactions, the obligation imposed by US-GAAP on companies to verify whether a seller (i.e. a seller) has the option to repurchase or repurchase the financial assets on essentially agreed terms, even in the event of default by the purchaser , in a pension room, when it determined whether the seller maintained effective control and, therefore, the pension as a guaranteed loan and not counted as a sale. with a buy-back contract in the future). The FASB on Thursday released a revised standard that expresses investors` concerns about financial reporting on retirement transactions and brings U.S. GAAP accounting closer to such IFRS transactions. Because some deposits are settled at the maturity of the transferred assets, they do not meet the repurchase requirement before maturity, so that the ceder does not retain any effective control.

If the remaining conditions of de-accounting in CSA 860 are met (i.e. the isolation and the right of the purchaser to wage or exchange the assets), the rights payable at maturity would be counted as a sale with a forward redemption contract (i.e. a derivative valued at fair value by the net result). However, the FASB considers that such accounting « does not clearly provide sufficient information on a company`s risks [and] could potentially mask the company`s liquidity needs to meet the obligations arising from these transactions. » The revisions proposed by the FASB in January 2013 eliminate the sale bill for buy-out transactions. The revisions also replace guidelines that a transfer of a financial asset and simultaneous repurchase financing could be recognized as term agreements. The proposed guidelines would eliminate current CSA 860 guidelines for pension financing operations. Under the current guidelines, there is a reedative presumption that an initial transfer and buy-back financing concluded simultaneously with or in the economic phase between them would be considered to be related to each other and could therefore be considered derivatives if the assignor regained effective control over the assets initially transferred through a buyback. To explain the difference between the sales bill and the secure loan, look at the example of Lehman Brothers, which used major repo programs before finally going bankrupt in 2008. His practices are described in more detail in « How Lehman Brothers and MF Global`s Misuse of Repurchase Agreements Reformed Accounting Standards » on page 44 of this issue.