August 12, 2022

FASB Finally Gets Around to Preventing Lehman Bros Version 2.0

The Financial Accounting Standards Board has finalized its new accounting rule around repurchase agreements to assure similar transactions receive similar accounting treatment going forward.

FASB issued Accounting Standards Update No. 2014-11 to revise the rules around repurchase-to-maturity transactions, along with repurchase financings and related disclosures. The guidance changes the accounting for repurchase-to-maturity transactions and repurchase financing arrangements to align the accounting for other repurchase agreements, which are treated as secured borrowings. The new rule is meant to eliminate the opportunity to treat such transactions as the true sale of an asset, which would enable an entity to remove it from its balance sheet, thus reducing apparent leverage. [Compliance Week]

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