Pension transactions are accounted for in different ways depending on the type of repurchase transaction and the terms of the contract. In the case of leasing and calling options, the repurchase price is compared to the original sale price to determine whether the transaction should be considered as a leasing or financing agreement. In the put options, the repurchase price is compared to the initial sale price and the expected market value of the asset at the end of the contract, to determine whether the transaction should be counted as a lease, financing contract or return sale. ASC 606 has significantly changed the focus of the retirement operations guidelines and has become easier. This should simplify some of the ambiguous situations that are currently occurring under asc 605. A Dictionary of Accounting ” The new guide has been surprisingly surprisingly strongly supported by financial institutions. Chart 3 summarizes responses received from the FASB from two requests for advice. The first exposure project for the purpose of effective control of pension operations (November 2010) is expected to change the criteria for the introduction of effective control. It resulted in comments containing proposals that were then included in the final standard (“FASB proposes new accounting guidelines for rest,” KPMG Defining Issues, January 2013, No. 13-6). In particular, the massive support for the proposal in 2010 should be highlighted. The eight responses of the public audit firm can be qualified either in favour of the proposal or in favour of the proposal.
Out of a total of 19 responses, 16 can be labelled as preferred or qualified for the proposal. However, the second exhibition project, Effective Control for Transfers with Forward Agreements to Healthcare Assets and Accounting for Repurchase Financings (January 2013), received more mixed support. 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. In short, Lehman`s goal in using repo operations was to reduce the overall size of its balance sheet and reduce its leverage ratio, both of vital importance to maintaining a good credit rating. Guaranteed credit accounting does not achieve this objective and would result in unchanged leverage ratios. As a result, Lehman held a sales accounting with a buyout agreement. In this treatment, there is no recognition of a contractual obligation to repurchase in the balance sheet. The securities are debited at the time of return, the call option is removed and the cash returned to the lender includes an interest payment.
Exhibits 1 and 2 illustrate this approach. In total, Repos Lehman helped remove up to $50 billion of debt from the balance sheet, which had little or no impact on other financial statements.