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In this session, we explore repurchase agreements (repo agreements). A repurchase agreement involves one party selling an asset, such as inventory, for cash, with a pre-arranged agreement to buy it back later at a higher price. For example, if a seller sells inventory for $100 and agrees to buy it back for $106, the transaction effectively functions as a loan. This setup is crucial for revenue recognition, as it helps determine whether a company is truly selling an asset or entering into a financing arrangement. Understanding the mechanics of repo agreements is essential for accurate financial reporting.