Repurchase Agreement Journal Entry

For call and call options, the redemption price is compared to the initial sale price to determine whether the transaction should be accounted for as a leasing or financing agreement. For sale options, the redemption price is compared to the initial sale price and the expected market value of the asset at the end of the contract, in order to determine whether the transaction should be accounted for as a lease, financing agreement or sale with right of return. CSA 606 significantly changed the centre of gravity of the pension guidelines and made things easier. This should simplify some ambiguous situations that currently occur under ASC 605. Under previous rules governing rtM agreements, it was not considered that the licensor had effective control over the transferred assets, as it would not recover the assets before they matured. . . .

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