Page 162 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

Chapter 7

2.4 Sale and buyback

(1) Seller sells asset to
buyer for cash
Seller Ltd Buyer Ltd

(2) Seller can repurchase
asset in 12 months’
time

Have the risks and rewards transferred from manufacturer to dealer?

Must consider whether:

 the initial sale is made at fair value or not

 the seller is obliged to buy back the asset as per the terms of the arrangement

 any option to repurchase is likely to be exercised.

154