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Journal entry — Repurchase agreements — FASB adds project to its technical plan

Published on: Mar 22, 2012

Yesterday, the FASB added to its agenda a project on reexamining the accounting and disclosure requirements for repurchase agreements (repos) in ASC 860.1

The Board’s decision comes a little less than one year after the issuance of ASU 2011-03,2 which eliminated one of the criteria3 for assessing whether an entity maintains effective control over an asset transferred in a repurchase agreement. In feedback received during the previous repo project, and through subsequent outreach activities, financial statement users, preparers, and other constituents expressed to the Board various concerns about the accounting for repos. For example, some constituents (particularly users) were concerned about the application of the remaining effective-control criteria, including (1) the “substantially the same” criterion in ASC 860-10-40-24(a) and (2) the requirement in ASC 860-10-40-24(c) for a transferred asset to be repurchased or redeemed before maturity. These constituents generally view these transactions as financing transactions even though the accounting literature allows for sale accounting in some cases. Others indicated that more robust disclosures are needed about the (1) nature of the transactions, (2) uses of funds received, and (3) impact of repos on an entity’s credit standing and liquidity.

Accordingly, the Board instructed the staff to consider whether (1) ASC 860’s effective-control criteria for repurchase transactions can be amended to address constituents’ concerns (i.e., the Board hopes to avoid completely eliminating the notion of effective control for repurchase transactions) and (2) new disclosure requirements for repurchase agreements should be developed. The staff indicated that deliberations on the project may begin within four to six weeks


[1] FASB Accounting Standards Codification Topic 860, Transfers and Servicing.

[2] FASB Accounting Standards Update No. 2011-03, Reconsideration of Effective Control for Repurchase Agreements.

[3] See Deloitte’s May 2, 2011, Heads Up, for further details on the provisions of ASU 2011-03.

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