Repurchase Agreement Accounting Ifrs 15

  • April 11, 2021
  • Uncategorized

The obligation for a company to repurchase the asset (a futures contract – see 3.7.2); On the basis of IFRS 15, the repurchase transaction should be treated as a financing agreement that does not generate revenue. The accounting approach is as follows, the entity must recognize a financial liability and, in accordance with paragraph B68 IFRS 15, the difference between the initial selling price and the purchase price must be accounted for as financial interest. On December 31, 2018, the company chooses to exercise the buyback option, which is why the entity must detract from liability and record a rental result for the difference between the initial selling price and the purchase price, in this case 600. Under paragraph 66, the client does not control the assets in repurchase transactions and the entity must therefore continue to account for the assets in its financial statements, although the asset is used by a third party because the client has limited the ability to use the asset because it is a pension contract. In the borrower`s books, the bonds are recorded as assets and the money received by the lender would be recorded under the liability as a “pension contract loan” to easily understand the pension transactions, let`s look at the following plan. we can analyze that the customer is not incentivized to exercise the buyback option, so it is very likely that the option will not be exercised, in which case the transaction must be recognized as the sale of products with the right of return. Please provide a guide for accounting processing with newspaper articles. As a general rule, a pension contract is a contract by which an entity sells and promises an asset or has the possibility (either in the same contract or in another contract) to buy back the asset. Going back to the examples above, we find in the first contract that the purchase price is lower than the original selling price. An accounting position is indicated in the form of a secured credit and not a “sale” transaction. If the repurchase price is higher than the original selling price and above the market price, the transaction should be considered a financing agreement.

On the other hand, if the repurchase price is higher than the original selling price, the entity must take this transaction into account as a financing agreement. As of December 31, the customer chooses not to exercise the buyback option because the repurchase value is less than the market price, the customer sees no incentive to compel the business to exercise the buyback option, which means that this option is not exercised and that the company must recognize the revenues from the sale of the asset. In the second contract of the example, we find that the feed-in price is higher than the original selling price, which is why the company must recognize a financing agreement, as we have already seen in the table of reasons. In the first contract with Customer 1, a machine is sold for 3,500,000 with the right or obligation to repurchase the asset for 2,900,000, the maximum duration for the exercise of the buyback option is one year from January 2018.