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8.5 Sales of equipment with guaranteed minimum resale

amount

ASC 842-30-55-2 through 55-4 address the accounting for sales incentive programs in which the
manufacturer contractually guarantees that the purchaser will receive a minimum resale amount at
the time the equipment is disposed of (contingent on certain requirements).

ASC 842-30-55-2
The manufacturer provides the guarantee by agreeing to do either of the following:

a. Reacquire the equipment at a guaranteed price at specified time periods as a means to facilitate its
resale

b. Pay the purchaser for the deficiency, if any, between the sales proceeds received for the equipment
and the guaranteed minimum resale value.

There may be dealer involvement in these types of transactions, but the minimum resale guarantee is
the responsibility of the manufacturer.

ASC 842-30-55-3

A sales incentive program in which an entity (for example, a manufacturer) contractually guarantees
that it has either a right or an obligation to reacquire the equipment at a guaranteed price (or prices) at
a specified time (or specified time periods) as a means to facilitate its resale should be evaluated in
accordance with the guidance on satisfaction of performance obligations in paragraph 606-10-25-30
and the guidance on repurchase agreements in paragraphs 606-10-55-66 through 55-78. If that
evaluation results in a lease, the manufacturer should account for the transaction as a lease using the
principles of lease accounting in Subtopic 842-10 and in this Subtopic.

ASC 842-30-55-4
A sales incentive program in which an entity (for example, a manufacturer) contractually guarantees
that it will pay a purchaser for the deficiency, if any, between the sales proceeds received for the
equipment and the guaranteed minimum resale value should be accounted for in accordance with
Topic 460 on guarantees and Topic 606 on revenue from contracts with customers.

If the transaction is not accounted for as a sale, the manufacturer-guarantor continues to recognize the
asset. ASC 460, Guarantees, would not be applicable because that guidance does not apply to a
guarantee on a guarantor’s own asset.

8.5.1 Sales of equipment with guaranteed minimum resale amount accounted for as an
operating lease

ASC 842-30-55-6 through 55-9 describe the accounting for the sale of equipment with a guaranteed
minimum resale amount that is classified as an operating lease.

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