securitization
AGREEMENTS THAT ENTITLE AND OBLIGATE THE TRANSFEROR TO REPURCHASE TRANSFERRED ASSETS Agreements that both entitle and obligate the transferor to repurchase transferred assets that are readily obtainable often do not maintain the transferor’s effective control over the transferred assets and, therefore, may be accounted for as sales. Examples of these types of agreements include repurchase agreements, dollar rolls and securities lending transactions. To consider these agreements as borrowings, because they maintain the transferor’s control over the transferred financial assets, all of the following criteria must be met: l The assets to be repurchased or redeemed are the same or substantially the same as those transferred l The transferor is able to repurchase or redeem the assets on substantially the agreed terms, even in the event of default by the transferee (i.e., transferor must at all times during the contract term have obtained cash or other collateral sufficient to fund substantially all of the cost of purchasing replacement assets from others) l The agreement is to repurchase or redeem the assets before maturity, at a fixed or determinable price l The agreement is entered into concurrently with the transfer.