FASB revises standard for accounting of repurchase agreements

BY SABINE VOLLMER

FASB on Thursday issued a revised standard that addresses investors’ concerns with the financial reporting of repurchase agreements and brings U.S. GAAP accounting for such transactions into closer alignment with IFRS.

Under the updated standard, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures, these transactions would be accounted for as secured borrowings and require enhanced disclosures that reflect the transferor’s obligations and risks.

The revisions, which FASB proposed in January 2013, eliminate sale accounting for repurchase-to-maturity transactions. The revisions also supersede guidance under which a transfer of a financial asset and a contemporaneous repurchase financing could be accounted for on a combined basis as a forward agreement.

“The new guidance addresses investor concerns about the distinction in GAAP between repurchase agreements that settle at the same time as the maturity of the transferred financial asset, and those that settle any time before maturity,” FASB Chairman Russell Golden said in a statement.

Also, the new standard enhances disclosure requirements:

  • For transactions economically similar to repurchase agreements in which the transferor retains substantially all of the exposure to the economic return on the transferred financial asset throughout the term of the transaction.
  • About the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings.


For public companies, the accounting changes under the new standard take effect with the first interim or annual period beginning after Dec. 15, 2014. The disclosure changes for certain transactions accounted for as a sale take effect at the same time. Disclosure for transactions accounted for as secured borrowings is required to be presented for annual periods beginning after Dec. 15, 2014, and interim periods beginning after March 15, 2015.

For all other entities, the changes take effect with annual periods beginning after Dec. 15, 2014, and interim periods beginning after Dec. 15, 2015.

Sabine Vollmer ( svollmer@aicpa.org ) is a JofA senior editor.

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