U.S. Accounting Board Changes Rule on Repurchase Transactions

The U.S. Financial Accounting Standards Board changed its rule on the way it determines whether repurchase transactions can be considered a sale after “financial statement users” voiced concerns.

The transferor of assets in a repurchase transaction no longer has to show an “ability to repurchase or redeem” the assets to determine effective control, according to the statement by the Norwalk, Connecticut-based accounting board. Under accounting rules, the transaction may or may not be determined a sale depending on whether the entity holds effective control over the assets.

The change was in response “to concerns from financial statement users who felt the criteria for determining effective control for such transactions should be improved,” Chairman Leslie F. Seidman said in the statement. “The new guidance improves transparency by eliminating consideration of the transferor’s ability to fulfill its contractual rights and obligations from the criteria in determining effective control.”

To contact the reporter on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net

To contact the editor responsible for this story: Alec McCabe at amccabe@bloomberg.net.

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