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in this video were going to go over the accounting for repurchase agreements when used as a form of secured borrowing in a repurchase agreement a company transfers or sells an asset to a customer but has an unconditional obligation or right to repurchase the asset at a later date notice we use the word transfers as opposed to sale because weve got that unconditional obligation to repurchase the asset at a later date and if that obligation our right to repurchase is for an amount greater than or equal to the initial selling price then we consider the transaction a financing transaction banks will often engage in repurchase agreements as a form of short-term secured borrowing and the type of collateral thats typically involved is the buying and selling of treasury bills ill sell you a treasury bill today for 990 and promise to buy it back tomorrow for a thousand dollars ive just committed to paying ten dollars in interest think about a pawn shop lets say i want to borrow a thousand
