Sale And Repurchase Agreement Accounting Treatment Ifrs

7 TURNOVER ACCOUNTING POLICY The turnover recorded in the industrial holding relates to the proceeds from the sale of vehicles and services. Revenue from vehicles and services is recognised when control has been transferred from the Volvo Group to the customer. Control focuses on the ability of customers to use vehicles or services in their operations and to maintain the cash flows associated with the use. Vehicles and services are sold separately or as a combined offer. In the case of combined offers where the vehicle and services are separable and the customer can benefit independently from the vehicle and the service, the transaction price is allocated on the basis of the autonomous selling price according to price lists between vehicles and services. Vehicles vehicles Includes the sale of new vehicles, machinery and engines, as well as the sale of used vehicles, machinery, trailers, superstructures and special vehicles. A standard contractual warranty is included as part of the sale, for more information in Note 21 Other provisions relating to the product warranty. The customer can pay for the vehicle at the point of sale or defer payment by reflection contract, such as installment credit and financial leasing. The second contract has the same characteristics as contract 1, except that the redemption price is 3,700,000. Residual value obligations, which are independent of the sale transaction, are not recognised in the balance sheet as operational leasing assets or as rights of return, so potential residual value risks related to these contracts are recognised as provisions. To the extent that the residual risk does not meet the definition of a provision, the gross risk is recognised as a contingent liability. To explain the difference between sales accounting and secured borrowing, we look at the example of Lehman Brothers, which implemented extensive repo programs before finally filing for bankruptcy in 2008.

Its practices are described in more detail in „How Lehman Brothers and MF Global`s Misuse of Repurchase Agreements Reformed Accounting Standards“ on page 44 of this issue. In short, Lehman`s goal in using repo operations was to reduce the overall size of its balance sheet and reduce its debt ratios, two of the utmost importance for maintaining a good credit rating. . . .