sale-repurchase agreement

37 Simple Purchase Agreement Templates [Real Estate, Business]

sale-repurchase agreement

A real estate purchase agreement template is a convenient resource for use when making the legal purchase of a property. You might also know of the purchase agreement as a residential real estate agreement or a real estate purchase contract.

Another title for this important legal document includes the Agreement to Purchase Real Estate.

When referencing the agreement for the purposes of buying a business, the legal form is an Asset Purchase Agreement or a Business Purchase Agreement template.

The document is necessary at some point when you are buying a property from another. It is a legal form you will eventually encounter during the home buying process.

When buying a home there are myriad steps involved in the process, all of which happen before the simple purchase agreement template can be filled out with the information the document requires.

First you must work with a broker to help find the home you want (a process that can take weeks or months depending on what you’re looking for and property availability). Then the complex negotiations process begins, wherein you make a counter offer to the seller’s initial price.

Purchase Agreement Templates

The negotiations might go on for some time before an agreement is made between seller and buyer. What you, as the buyer can afford, and the conditions of the market at the time play a crucial role in the home bidding process.

After the trials and tribulations of home buying negotiations happens, it’s now the time when the home buying contract is written up. It is the stage where the real estate purchase agreement template takes on considerable import.

The purchase agreement for buying a property is a legal contract. The parties in the contract are the seller(s) and the buyer(s). The contract is one called a bilateral agreement between the parties.

It is legal form binding both parties to the agreement defined within the document. It makes for clear terms when buying, exchanging, or giving any form of real property from one party to another.

The document defines the Considerations within the text; This term is a reference to the funding the parties agree to during the negotiations process.

The Consideration part of the document is not only a reference money, but it also defines the terms when the parties agree to a promise to pay (Promise to Perform) or an exchange is part of the agreement. It is important to note that the purchase agreement is one that is only in instances where the property in question has no incomplete construction.

What purpose does it serve?

The simple purchase agreement template serves to protect the buyer and seller. It is a form that documents an agreement so that each party ensures fair treatment during the transaction.  The document template allows for the ease in creation of a complex document.  Some of the most basic details the legal form covers include:

  • The contact information of the seller and information on seller identification. This is vital and required information clearly identifying the present owner of the property before its transfer.
  • The contact information of the buyer and information on buyer identification. This is vital and required information clearly identifying the party the property transfers to once the terms of the agreement are met by the buyer(s).
  • Information about multiple sellers and/or buyers. When there are multiple parties involved in the agreement, all parties are identified in the agreement.
  • The details of the property as the county as it listed in parcels. This makes clear to county officials what property is sold land survey information.
  • Financing information and the price of the property to which the parties have agreed. This makes clear how the buyer will pay for the property. it also defines the final price agreed to for the completion of the sale.
  • The date the closing will occur. Closings are important meetings involving the presence of legal representation. The date the home owner takes possession of the property is covered during the closing.
  • Home owner’s insurance information. The home must remain covered during the process of the loan.
  • Information on the ways in which conflicts will see resolution. Clear parameters for dealing with differences in relation to the contract are put into writing.
  • The contract termination details. This includes the steps the buyer must take in the event they want to pull the contract to buy.
  • Other important facts and information in relation to the home buying process. This section of the real estate purchase agreement will cover things funds, escrow details, warranties (if applicable), home inspection information, and property title requirements.

Once the contract is written, the buyer needs to be aware that until the closing on the property, the buyer has the option of selling to another party with a better bid or not selling at all.

  The real estate purchase agreement does not force the seller to follow through the sale of the property. Only the sale, which is set for the future or closing date, is the purchase of the property a sure thing.

  The contract you create before the final sale is the purchase agreement defining all the responsibilities of involved listed parties.

Who should use the purchase agreement template?

If you are planning to sell a piece of property, the template is ideal for presenting a potential buyer with details explaining all the steps involved in the sale, from negotiations to the date of the house closing. The contract is also one that the buyer can present to a seller to formalize the sale of real property.

The document defines how a piece of property will be transferred but it is not enact the transfer.  It only puts forth the definitions of what both parties are agreeing to in relation to the completed sale and transfer of property. The purpose of the document is for making clear the responsibilities of each party taking part in the bilateral contract.

The document is something suitable for anyone looking to protect themselves with a legally-binding document describing the terms parties are agreeing to when buying and selling an asset. In general, the document is useful to:

  • Home sellers: Whether selling through private sale or with a real estate broker’s aid.
  • Home buyers: Whether buying through a private sale or with the help of a real estate agent.
  • Real Estate Lawyers: Usually the contract overseer and creator at the home closing.
  • Business sellers and buyers: For commercial property sales.

The real estate purchase agreement template makes the creation of the legal home buying contract easy.

If you are a private seller looking to protect your commercial interests when you make the sale of your home, the template is something you can use for contract creation.

The contract is one that is necessary if the private seller plans to finance the property for the homebuyer. It can define the promise to pay terms both parties agree to so all party responsibilities are clear and legally-binding.

If the transaction is occurring between family members, emotions or family issues might arise. The simple purchase agreement template allows for legal contract creation which disallows any emotional or familial issues to effect or change the responsibilities of the parties within the contract.

  Following contract finalization, it gives one or both parties legal recourse if one of the parties in the contract breeches the agreement.

The asset purchase agreement is suitable whenever you are selling a property that has a pre-built home, formerly owned home or when buying a property where the construction is complete.

The Simple Purchase Agreement Template

Above the most basic of document elements appear. The contract for buying a property may have unique elements within it, depending upon the parameters of the agreement. One element includes the Promise to Pay, which defines the financing parameters. There are four types of financing terms the buyer and seller might agree to:

  1. Mortgage Assumption Solutions: The real estate purchase agreement might also define the terms of having a home buyer take responsibility of a home seller’s existing mortgage. The loan becomes the buyer’s responsibility, but only if the buyer can meet the parameters defined by the lender who holds the loan. The buyer’s credit, job history, and available funds will play a role in the approval of this type of home financing solution.
  2. No Home Financing: The home must be something the buyer pays for in full to buy it.
  3. Private Seller Home Financing: If a buyer cannot get a loan for whatever reason, the seller might offer private seller home financing solutions. Some sellers who own the home “outright” and who do not have to pay off a mortgage might offer private seller financing solutions.
  4. Third Party Home Financing: Here the buyer works with a lender who gives the buyers a monetary loan for the purchase of the home. The buyer pays the lender over an agreed to term for the property. The loan size and interest rate is a factor figured on buyer credit rating.

There are many other elements buyers and sellers might include in a contractual agreement. These elements are something that lends clarity to the agreement. Each inclusion also serves as an extra level of legal protection for both parties. Here are some more contractual elements you might encounter:

Earnest Money: Within the simple real estate purchase contract, there may be a mention of Earnest Money. This reference signifies the down payment the buyer offers to prove a solid interest in the home.

The Earnest Money stays the property of the potential buyer until the contract reaches finalization. If the seller ends up selling the home to another, the Earnest Money funds go back to the buyer who did not buy the property.

Escrow Parameters:  This defines who the third-party is who will hold onto and protect any monies that end up transferring to the buyer once the home becomes the possession of the buyer.

The transfer occurs at the closing of the home.

The third party is a choice for keeping all funds protected until all contractual elements, including financial, insurance coverage, and inspections, are fulfilled.

Disclosure Information: Many states require the home buyer make clear any information the buyer needs to know about the home before the sale can take place.

For example, if the home needs repairs or if there is an issue that might otherwise influence the value of the property, the buyer must let the seller know in writing about these issues.

The buyer needs to be aware of any additional costs they face once they own the home.

Some of the mentioned issues you might see in a contract include problems with the structure of the property, mold or pest control issues, broken appliances, roof or other home defects, and anything that has happened in the home’s history that might otherwise change home value or deter a buyer from wanting the property. With clear disclosure, the buyer goes into the contract knowing exactly what they are getting for their money.

Other elements of contract creation include:

  • The inclusions of property.
  • The exclusions of property purchase.
  • Property deposit before purchase.
  • Costs of home closing and what party handles specific costs.
  • The potential closing date (Which can only happen with both parties fulfill all contractual obligations).
  • Parties signatures.
  • Home buying Contingencies: including mortgage details, home appraisal information, professional home inspection requirements, pre-sale of other property requirements before funding new sale, and opt-out options for buyer and seller.

A purchase agreement is something that is a complex document. It needs to have all the right elements in it to protect both the buyer and selling during the home sale transaction. The use of a real estate purchase agreement template makes it easy to design a legally-binding document.

It helps the buyer and seller ensure clear, concrete terms for the sale of the property. The template is a suitable resource to ensure every contractual element the document should have is one the contract covers.

The template is something every buyer/seller needs to buy a home with confidence.

Asset Purchase Agreement

Источник: https://templatelab.com/purchase-agreement/

Repurchase Agreement (Repo) — FXCM UK

sale-repurchase agreement

A repurchase agreement is a short-term loan that is structured as the sale of securities, with the seller agreeing to buy them back at a later date. In a repurchase agreement, the borrower (i.e.

the seller) sells securities to the buyer (the lender) for a predetermined price higher than what the securities were sold for.

That difference is the interest on the loan and is treated as such for tax purposes.

The securities involved are usually U.S. Treasuries, which provide the collateral for the loan. If the seller can't buy them back for some reason, the buyer can readily sell them on the open market. As a result, repurchase agreements backed by Treasuries are considered very safe and are therefore a cheap way for institutions to borrow short-term money.

A reverse repurchase is simply the buyer, or lender, side of the agreement. In this case, the reverse repo holder is looking to earn extra interest income on their money with minimal risk and for a very short term. Buyers also earn the interest on the underlying securities for the duration they are held.

Repurchase agreements are often known as repos for short. However, they should not be confused with another type of repo, which is short for repossession, such as that of a physical asset backing a loan, such as an automobile.

Generally, repurchase agreements are very short-term loans, often overnight, although they can be for longer than that, although almost always less than one year.

The Tenor

The term or maturity of a repo is generally known as its «tenor,» although «rate» and «term» are also commonly used.

The tenor of the repo is very important, because the longer the term of the loan, the greater the credit risk that the seller won't be able to buy the securities back.

There is also greater market risk that the price of the securities may drop in the meantime. As a result, repos are usually backed by securities with a market value higher than the amount paid for them.

While the vast majority of repos have set term limits, usually one day, some are open-ended, which means the buyer isn't sure how long they need to borrow the money. In this case, the loan rolls over each day. However, these transactions usually expire before one year.

In a typical repo, a clearing agent or a bank acts as the middleman, protecting the interest of both the buyer and the seller. It holds the securities and makes sure the seller gets the cash from the buyer at the beginning of the transaction and the buyer delivers the securities back to the seller when the term of the deal ends.

The repo market is huge. According to the Securities Industry and Financial Markets Association, the U.S. repo market had a daily turnover of $2.2 trillion in 2016. [1] That's more than four times the daily trading volume of U.S. Treasury securities.[2]

Central Bank Monetary Policy

Repos and reverse repos are generally used by large financial institutions, such as commercial banks, government securities dealers, hedge funds, money market funds, insurance companies, and the . They are part of the money market. However, they have become a common instrument used by central banks to conduct monetary policy, such as to control interest rates and the money supply.

The U.S. Federal Reserve, for example, enters into repos and reverse repo agreements to regulate the money supply and bank reserves, and inject or remove funds from the financial markets. The Fed sets the rate at which it will buy securities, which is called the repo rate, and it's similar to the federal funds rate.

For example, if the Fed wants to inject liquidity into the market and boost the money supply, effectively lowering short-term interest rates, it would offer to buy Treasury bills or other government securities from banks.

This raises their reserves and provides them with more money to lend, with the promise to sell the securities back at a later date.

Conversely, if it wants to tighten the money supply and therefore raise interest rates, it would sell securities and buy them back later.

By using the repo market, the Fed can conduct monetary policy more discreetly without raising or lowering the federal funds rate, which would be a more dramatic move and might unsettle the markets.

A repurchase agreement is a short-term loan that is structured as the sale of securities, with the seller agreeing to buy them back at a later date for a higher price, with the difference being the effective interest on the loan. The securities involved are usually U.S. Treasuries, which provide the collateral for the loan.

A reverse repurchase is the other side of the transaction, with one party agreeing to buy securities and sell them back later. The repo market is huge, with daily volume about four times larger than the Treasury securities trading market itself.

Источник: https://www.fxcm.com/uk/insights/repurchase-agreement/

Экономический словарь — значение слова Sale-repurchase Agreement (соглашение О Продаже И Обратной Покупке)

sale-repurchase agreement

См.: purchase (покупка ранее проданного).

Смотреть значение Sale-repurchase Agreement (соглашение О Продаже И Обратной Покупке) в других словарях

Соглашение — договоренностьуговорсговор

Словарь синонимов

Соглашение Ср. — 1. Процесс действия по знач. глаг.: соглашать (3). 2. Взаимное согласие, договоренность. 3. Договор, устанавливающий взаимные обязательства. 4. Союз, объединение.
Толковый словарь Ефремовой

Взаимовыгодное Соглашение/решение — не ущемляющее ничьих интересов, при котором все стороны конфликта извлекают выгоду и являются победителями. Такие соглашения наиболее вероятны в тех случаях, когда……..
Политический словарь

Соглашение — соглашения, ср. 1. только ед. Действие по глаг. согласить в 1 знач. — соглашать (книжн.). мнений. противоречий. 2. только ед. Действие по глаг. согласиться во 2 знач. — соглашаться……..
Толковый словарь Ушакова

Соглашение — -я; ср.1. Взаимное согласие (2 зн.), договоренность. Взаимовыгодное, предварительное, тайное с. Достичь соглашения сторонам не удалось. Это можно сделать только по соглашению……..

Толковый словарь Кузнецова

Агент По Продаже Недвижимости — Должностные обязанности. Осуществляет работу по покупке, продаже или аренде недвижимости от имени и по поручению клиентов. Получает информацию о продаваемом или сдаваемом……..
Юридический словарь

Агентское Соглашение — — договор между лицом, нанимающим агента (принципалом), и самим агентом, согласно которому агенту поручается на определенных условиях выполнение от имени и в интересах……..
Юридический словарь

Арбитражная Оговорка (арбитражное Соглашение) — — соглашение сторон о передаче в арбитраж всех или определенных споров, которые возникли или могут возникнуть между ними в связи с каким-либо правоотношением. независимо……..
Юридический словарь

Арбитражное Соглашение — — соглашение сторон о передаче в арбитраж всех или определенных споров, которые возникли или могут возникнуть между ними в связи с каким-либо конкретным правоотношением,……..
Юридический словарь

Арбитражное Соглашение (арбитражная Оговорка) — Соглашение заинтересованных сторон о передаче спора между ними на разрешение в порядке арбитража. Юридическое значение арбитражного соглашения (оговорки) состоит……..
Юридический словарь

Генеральное Соглашение — — по Закону РФ «О коллективных договорах и соглашениях» от 11 марта 1992 г правовой акт, регулирующий социально-трудовые отношения между работниками и работодателями и……..
Юридический словарь

Генеральное Соглашение По Тарифам И Торговле (гатт) — — крупнейший многосторонний торговый договор, на базе которого в последние годы сложился механизм, обладающий чертами международной организации (с 1994 г. получила название……..
Юридический словарь

Генеральное Соглашение По Тарифам И Торговле, Гатт — (англ. — GATT — General Agreement of Tariffs and Trade) -1) международная организация, действующая с 1 января 1948 г. (с 1994 г. получила название Всемирной торговой организации — ВТО) на базе межправительственного……..
Юридический словарь

Джентльменское Соглашение — — особый вид неформального международного соглашения (договоренности). В отличие от обычных договоров несоблюдение Д.с. влечет (как правило) последствия только морального……..
Юридический словарь

Доказывание По Делам О Признании Недействительными Торгов По Продаже Арестованного Имущества — По действующему законодательству РФ реализация арестованного имущества по общему правилу производится путем продажи его на комиссионных и иных договорных началах……..
Юридический словарь

Картельное Соглашение — — договоренность между двумя или несколькими предприятиями, фирмами о создании картеля. Различают горизонтальное соглашение, заключаемое между одинаково специализированными……..
Юридический словарь

Клиринговое Соглашение — — соглашение между правительствами или центральными банками нескольких стран о централизованном взаимном зачете встречных требований и обязательств во внешней торговле.
Юридический словарь

Компенсационное Соглашение — возмещение международных кредитов и услуг в определенные сроки и на определяемых условиях; вид внешнеторговых соглашений, при которых покупатель товара оплачивает……..
Юридический словарь

Консорциальное Соглашение — — см. Консорциум.
Юридический словарь

Конституционное Соглашение — — в ряде стран (Великобритания, Новая Зеландия и др.) один из источников конституционного права, разновидность правового обычая. Представляет собой правила политической……..
Юридический словарь

Кредитное Соглашение — — договор между кредитором и заемщиком, определяющий размер и условия предоставления кредита, права и обязанности субъектов кредитных отношений.
Юридический словарь

Лицензионное Соглашение — — договор о предоставлении прав на коммерческое и производственное использование изобретений, технических знаний, инжиниринговых услуг, товарных знаков, ноу-хау. В……..
Юридический словарь

Мадридское Соглашение — — международная регистрация товарных знаков осуществляется посредством Мадридской системы регистрации, которую образуют и Мадридский протокол. Административные……..
Юридический словарь

Мировое Соглашение — — соглашение сторон, которое прекращает судебный спор на основе взаимных уступок. При этом стороны могут предусмотреть порядок распределения судебных расходов, а также……..
Юридический словарь

О Покупке К Заводам Деревень /1721 Г./ — — указ, нарушивший дворянскую монополию на землю. Промышленники, выходцы из мещанства и крестьянства с разрешения Берг- и Мануфактур — коллегий получили право на приобретение……..
Юридический словарь

Оговорка О Продаже Судна — — специальная оговорка, которая содержится в полисах по страхованию судов и предусматривает прекращение действия полиса в случае изменения его владельца. Страховщик……..
Юридический словарь

Опционное Соглашение — — предварительное лицензионное соглашение, в соответствии с которым потенциальный лицензиат (покупатель) получает право более детального ознакомления с интересующим……..
Юридический словарь

Особенности Доказывания При Продаже Товаров — В силу п. 1 ст. 4 Закона РФ «О защите прав потребителей» (в ред. Федерального закона от 9 января 1996 г. №2-ФЗ) продавец обязан передать потребителю товар, качество которого……..
Юридический словарь

Отраслевое (межотраслевое) Тарифное Соглашение — — по Закону РФ «О коллективных договорах и соглашениях» от 11 марта 1992 г правовой акт, регулирующий социально-трудовые отношения между работниками и работодателями и……..
Юридический словарь

Отраслевое (тарифное) Соглашение — — правовой акт, устанавливающий направления социально-экономического развития отрасли, оплату и условия труда, социальные гарантии для работников отрасли (профессиональных……..
Юридический словарь

Посмотреть в Wikipedia статью для Sale-repurchase Agreement (соглашение О Продаже И Обратной Покупке)

Источник: http://slovariki.org/ekonomiceskij-slovar/50818

Repurchase Agreements in ASC 606

sale-repurchase agreement

Some contracts contain a repurchase agreement that obligates, or gives an entity the option, to repurchase the asset being sold. The accounting treatment depends on the type of repurchase agreement and the terms of the contract.

Repurchase agreements that qualify as financial instruments are outside the scope of this article.

The remainder of this article discusses how to account for repurchase agreements and outlines changes from Accounting Standards Codification (ASC) 605 to ASC 606.

Types of Repurchase Agreements

Repurchase agreements come in three different forms:

  • The entity’s obligation to repurchase the asset (forward).
  • The entity’s right to repurchase the asset (call option).
  • The customer’s right to require the entity to repurchase the asset (put option).

The accounting treatments for these repurchase agreements are discussed in the following sections.

Forwards and Call Options

Under a forward or a call option, the customer cannot direct the use of the asset to obtain all of its benefits, which indicates that the customer does not have control of the asset.

Consequently, the entity does not recognize revenue when it transfers the asset, but continues to recognize the asset and records a liability on its books.

Forwards and call options are accounted for whether the repurchase price is more or less than the original selling price:

  • Lease Agreement – If the repurchase price is less than the original selling price, and the arrangement is not part of a sale-leaseback agreement, the repurchase agreement is accounted for as a lease (ASC 840).
  • Financing Arrangement – If the repurchase price is more than or equal to the original selling price, or the arrangement is part of a sale-leaseback agreement, the repurchase agreement is accounted for as a financing arrangement.

In a financing arrangement, the entity continues to recognize the asset and records a liability for any amount of consideration received from the customer.

Any amount that the entity will pay in excess of the original selling price is accounted for as interest expense or holding costs.

If the entity decides not to exercise the call option, it derecognizes both the liability and the asset and recognizes revenue equal to the consideration received.

When comparing the repurchase price to the original selling price, the entity should take into consideration the time value of money. The effects of time value of money may be large enough to change the accounting from a financing arrangement to a lease agreement.

Put Options

Under a put option, the customer can require the entity to repurchase the asset by exercising the option. This option allows the customer to obtain all of the benefits of the asset, which indicates that the customer has control of the asset.

Put options are accounted for in one of three ways (1) whether the repurchase price is more or less than the original selling price, (2) whether the repurchase price is more or less than the expected market value, and (3) whether the customer has a significant economic incentive to exercise the option:

  • Lease Agreement – The repurchase agreement is accounted for as a lease (ASC 840) if the repurchase price is less than the original selling price, the arrangement is not part of a sale-leaseback agreement, and the customer has a significant economic incentive to exercise the option.
  • Financing Arrangement – The repurchase agreement is accounted for as a financing arrangement if the repurchase price is more than or equal to the selling price and more than the expected market value of the asset.
  • Sale of Product with Right of Return – The repurchase agreement is accounted for as a sale with right of return if the customer does not have a significant economic incentive to exercise the option and either (1) the repurchase price is less than the original selling price or (2) the repurchase price is more than or equal to the original selling price but less than the expected market value of the asset.

Generally, a customer has a significant economic incentive to exercise an option if the repurchase price is expected to exceed the market value of the good at the time of repurchase. Since this evaluation requires estimates, management will need to exercise good judgment in determining the factors that are included in this evaluation.

Financing arrangements receive the same accounting treatment as forwards and call options. The accounting treatment for sales with rights of return are beyond the scope of this article, but are addressed at length in the Rights of Return and Customer Acceptance. The following flowchart provides a comprehensive review of the accounting process for repurchase agreements.

An entity enters into a contract to sell an asset to a customer for $1,200. The contract provides an option for the entity to repurchase the asset in three years for a price of $1,300.

The transaction is not part of a sale-leaseback arrangement. The company uses a 5 percent discount rate for similar transactions.

Should this transaction be accounted for as a lease agreement or a financing arrangement?

This transaction should be accounted for as a lease under the guidance in ASC 840. The option is classified as a call option since the company has the right to exercise the option.

At first glance, it appears that the repurchase price is more than the original selling price, but the present value of the repurchase price discounted at 5 percent for three years is $1,123.

Since the repurchase price is lower than the original selling price, and the transaction is not part of a sale-leaseback arrangement, the transaction is a lease.

Scenario B: Accounting for a Put Option as a Financing Arrangement

An entity enters into a contract to sell an asset to a customer for $1,500.

The contract provides an option for the customer to require the entity to repurchase the asset in three years for $1,600 (assume this price takes into account the time value of money). The transaction is not part of a sale-leaseback arrangement.

The expected market value of the asset in three years is $1,400. Should this transaction be accounted for as a lease agreement, financing arrangement, or sale with right of return?

This transaction should be accounted for as a financing arrangement. The option is classified as a put option since the customer has the right to exercise the option. The repurchase price is more than the original price of the asset and the expected market value of the asset, making the transaction a financing arrangement (the customer is providing financing to the company).

The company will recognize a liability of $1,500 for the consideration received from the customer. If the customer exercises the option in three years, the company records $100 ($1,600 – $1,500) of interest expense and reverses the liability.

If, however, at the end of the three years the customer decides not to exercise the option, the company recognizes $1,500 of revenue and reverses the liability.

Scenario C: Accounting for a Put Option as a Sale with Right of Return

Assume the same facts as scenario B, except the expected market value of the asset in three years is $1,650.

Under these circumstances, there is not a significant incentive to exercise the option because the customer can sell the asset for more in the market ($1,650) than it would receive from exercising the option ($1,600). In this case, the transaction is treated as a sale with a right of return.

Repurchase Agreements Comparison to ASC 605

The process for determining the nature of a repurchase agreement has changed significantly from ASC 605 to ASC 606. Under ASC 605, the guidance focused on whether the risks and rewards of ownership had been transferred to the customer.

ASC 606 focuses on both the nature of the repurchase rights and the difference between the repurchase price and the original selling price.

This change in focus makes the guidance more straightforward, which may simplify some ambiguous situations encountered under ASC 605.

The guidance on put options has also significantly changed. Under ASC 605, when a contract contained a put option that was designed to compensate a customer for holding costs and interest, the transaction was always accounted for as a financing arrangement.

Under ASC 606, entities are required to determine the lihood that the customer will exercise the option the asset’s expected market value.

As shown in scenario C, if the customer is unly to exercise the put option, the arrangement is accounted for as a sale with right of return.

Conclusion

Repurchase agreements are accounted for in a number of ways, depending on the type of repurchase agreement and the terms of the contract.

Under forwards and call options, the repurchase price is compared to the original selling price to determine whether to account for the transaction as a lease or financing arrangement.

Under put options, the repurchase price is compared to the original selling price as well as the expected market value of the asset at the end of the contract to determine whether to account for the transaction as a lease, financing arrangement, or sale with right of return. ASC 606 has significantly changed the focus of the guidance for repurchase agreements, making it more straightforward. This should simplify some ambiguous situations currently encountered under ASC 605.

Resources Consulted

Источник: https://www.revenuehub.org/repurchase-agreements/

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