What is a repurchase agreement (product financing) arrangement? How should a product repurchase agreement be reported in the financial statements?
Repurchase agreements (product financing arrangements) are essentially off-balance-sheet financing devices. These arrangements make it appear that a company has sold its inventory or never taken title to it so they can keep loans off their balance sheets. A repurchase agreements arrangement should not be recorded as a sale. Rather, the inventory and related liability should be reported on the balance sheet.
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