Page 186 - F2 Integrated Workbook STUDENT 2019

Chapter 7

1.7.3 Sale and buyback

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

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

Has control transferred from seller to buyer?

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

 an option exists to buyback; the buyer is restricted in its ability to direct the use
of the asset (it cannot sell it on until the option elapses, despite having the
physical use of the asset) and does not obtain all of the remaining benefits from
the asset.

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