Repurchase Agreement Revenue Recognition

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EdEd currently provides that if a customer has the unconditional right to require the entity to repurchase the asset (a put option), the customer must take control of the asset and the entity must take into account the agreement similar to the sale of the product with a right of return. The Staff recommended that a purchase and repurchase agreement with a sale option and a purchase price below the original sale price be considered a lease. When the repurchase price is at the initial sale price, staff recommended that the Put option be considered a right-of-return sale. IFRS 15 states that if the purchase price is higher than the original selling price, the customer is incentivized, but if the purchase price is lower than the original selling price, there is no incentive for the customer. To easily understand pension transactions, we re-explore the following pattern The entity must take into account the buyback as being leased in accordance with IFRS 16, if the sale is made, the entity cannot account for the revenues, because the entity still has control over the assets. In accordance with paragraph B70 IFRS 15, an entity is required to repurchase the asset at the customer`s request (a put option) at a price below the initial selling price of the asset, the entity verifies, at the beginning of the contract, whether the customer has a significant economic incentive to exercise that right. This was a response to some of the respondents` submissions that the purchase price of a put option is not always equal to or close to the original selling price and that, in some sectors, the put option is only exerciseable after the initial sale and that, in some cases, the purchase price is less than the original selling price. because the facility is not returned to the same condition as the one in which it was sold. Therefore, the client may be considered authorized to use the asset until the put option is exerciseable and, at this point, the customer may choose to retain the asset or resell it to the entity. These cases seem more economically comparable to a lease agreement than to a right of return. Staff expressed concern that there may be a trade-off between the leasing standard and the performance standard at this time.

Several board members expressed concern that the recommended wording of employees did not explicitly cover a time factor, a wear and tear factor or circumstances in which the repurchase price was significantly lower than the estimated market value, indicating that there was a sale and not a leasing transaction.