FASB revised its standards for repo agreements in 2011 as a response to the use of ‘Repo 105’ transactions by Lehman Brothers, and now the board have decided to add a new agenda item after the collapse of MF Global.
The former financial derivatives broker, which used ‘repo to maturity’ transactions, declared bankruptcy on 31 October 2011 and now faces questioning on the disappearance of an estimated $1.2 billion from customer accounts.
“Investors have raised concerns that the existing standard on repurchase agreements should be reconsidered to reflect changes in market practices,” said FASB chair Leslie Seidman in a statement. “The board will reconsider both the accounting and disclosure requirements to ensure that investors are getting useful information about repurchase arrangements.”
Information gathered by the board indicated that users of financial statements view repurchase agreements as financing transactions, and also said they would appreciate improved disclosures.
