Since the retirement operations were really loans, not sales, they did not correspond to the intent of the rule, according to Bushee. The rule therefore contained a provision that the assets in question would remain on the company`s books as long as the company agreed to repurchase them at a price between 98% and 102% of what it had received for it. If the repurchase price fell outside this narrow range, the transaction would be counted as a sale and not a loan, and the securities would not be accounted for on the company`s balance sheet until they were repurchased. The judgment is necessary to interpret the concept of most aspects and other aspects of the test that the terms of a pension transaction do not retain effective control over the transferred asset. However, agreements to reallocate or grant readily available securities credits, generally with a guarantee of up to 98% (for companies that accept the buyback) or up to 102% over-protection (for securities lenders), which are assessed daily and often adjusted according to changes in the market price of collateral transferred up or down, and with obvious powers to use these guarantees quickly in the event of default, are generally clearly under this directive. The Council considers that other guarantee agreements are generally largely outside of this directive. Repo 105 is the name of Lehman Brothers for an accounting maneuver it used when a short-term repurchase agreement was considered a sale. The money received by this “sale” is then used to pay off the debts, so that the company seems to reduce its leverage by temporarily paying its debts – just long enough to reflect on the company`s published balance sheet. After the publication of the company`s financial reports, the company borrows cash and repurchases its original assets. Note: It is assumed that securities with a book value of $95 and a fair value of $100 were sold to the purchaser.
Earnings is the difference between the book value of the assets and fair value (sale price). The seller receives 98% of the fair value in cash, a discount of 2%. The difference between the fair value of the asset and the asset received/paid corresponds to the buy-back/resale contract. Since the underlying purpose of most pension transactions is to borrow or borrow money, the transaction is considered a historically authorized sale for off-balance sheet financing by the purchaser. Repo 105 was a kind of discrepancy in the accounting of buyback operations (repo) that the Lehman Brothers, now erased, exploited to hide real leverage in the difficulties of the 2007-2008 financial crisis. In this repurchase agreement, since it has been updated to fill the gap, a company could classify a short-term loan as a sale and then use the cash proceeds of the “sale” to reduce its liabilities. Following the release of the auditor`s report, the Securities and Exchange Commission (SEC) sent letters to the CFOs of nearly two dozen large financial and insurance companies requesting the use of pension transactions by their companies, including the number and quantity of these agreements likely to be subject to the sales invoice and a detailed analysis of why such transactions may be considered sales. SEC President Mary Schapiro said the agency was trying to determine whether other companies were using techniques similar to the one used by Lehman Brothers” Repo 105.
 Evidence that there was no asset repurchase agreement was another complication, with Lehman focusing on the provision that the assignor must do so under “essentially agreed terms.” This required the assignor to receive sufficient liquidity or other guarantees to finance, for the most part, all costs associated with the acquisition of other assets. The FASB had not provided a detailed explanation for the phrase “essentially all.” However, the implementation guidelines for SFAS 140, paragraph 218, indicated in part that when Jon Corzine became CEO of MF Global in 2010 – after losing his re-reading