Repurchase Agreement Fair Value Hierarchy

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The proposed guidelines would eliminate current CSA 860 guidelines for pension financing operations. Under the current guidelines, there is a reedative presumption that an initial transfer and buy-back financing concluded simultaneously with or in the economic phase between them would be considered to be related to each other and could therefore be considered derivatives if the assignor regained effective control over the assets initially transferred through a buyback. One of the conditions that may affect an entity`s account of a credit bank as a secured loan or a sale with a forward repurchase contract is whether the asset repurchased at the time of liquidation is the same asset or, for the most part, the abandoned asset. ASC 860 currently provides application guides that help businesses make decisions. However, the FASB learned through its public relations that companies interpreted « essentially the same thing » and interpreted the application guidelines differently. Thus, the proposed ASU (1) states that: that « the financial asset initially divested and the financial assets to be repurchased or repurchased should offer the ceding the same risks and rights in order to put the assignor in an equivalent economic position, with the return on an asset substantially identical to the return on the identical asset » (2) and (2) the implementation guidelines relating to the determination of particular asset-backed securities). The financial assets that must be transferred upon settlement of the contract are: 3. For an agreement with a settlement date at the maturity of the transferred financial asset, a cash change equal to the withdrawal or clearing value of the financial assets initially transferred by the transferor to the assignor and the transfer of the fixed redemption price from the transferor to the transferor (or the difference between these amounts). On January 15, 2013, the FASB adopted a proposal for ASU1, which would amend the US-GAAP by requiring repurchase contracts (« rest »2) that take into account the criteria of credit backed as a guaranteed loan and not as sales with forward redemption contracts, including rest, that charge at maturity for transferred assets. The proposed ASU would require companies to disclose, from each balance sheet closing date (1), the « gross amount of total borrowing, broken down by type of financial assets in the form of collateral » for secured debts and (2) the book value of assets not recorded during the reference period only « because the assets repurchased did not meet substantially identical requirements. » The proposed ASU would require that the pension financing transaction be assessed on the basis of the criteria for the recorded loan, without presuming the link and the reductive potential on behalf of derivatives. As a result, these transactions can be accounted for as secured bonds more often than they are currently.

If the rest meets the revised conditions of effective control, the transaction would be counted as a guaranteed loan (it would not be necessary to assess the other general conditions of de-accounting of CSA 860 related to the legal isolation and the purchaser`s pledge or exchange rights). However, if the rests do not meet one or more of the above effective control conditions in deciding whether transactions such as guaranteed bonds or forward sales should be taken into account, companies would continue to apply the other general de-accounting conditions of CSA 8607.7 The proposed ASU also states that « the agreement is assessed in accordance with paragraphs 860-10-40-5 c) to the extent that it has other features that warrant effective control.