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Transferor Corp |
Transferee Corp |
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At inception:
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At inception:
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Dr. Cash
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$980
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Dr. Reverse repo agreements
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$980
|
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Cr. Obligation under repo agreements
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$980
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Cr. Cash
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$980
|
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To record the receipt of cash and obligation under repo agreement
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To record transfer of cash to Transferor Corp in exchange for security (noncash collateral)
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Dr. Securities pledged to Transferee Corp
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$1,000
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Cr. Securities
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$1,000
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To reclassify pledged security that Transferee Corp has the right to sell or repledge
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Transferee Corp does not recognize the security (noncash collateral) on its balance sheet. An obligation to return the security is recorded only if Transferee Corp on-sells it.
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Dr. Money market instrument
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$980
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Cr. Cash
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$980
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To record investment of cash collateral
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At conclusion:
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At conclusion:
|
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Dr. Cash
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$985
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Dr. Cash
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$984
|
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Cr. Interest income
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$5
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Cr. Reverse repo agreements
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$980
|
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Cr. Money market instrument
|
$980
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Cr. Interest income
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$4
|
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To record results of short-term cash investment
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To record receipt of cash upon maturity of reverse repo agreement and related interest income
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Dr. Obligation under repo agreements
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$980
|
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Dr. Interest expense
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$4
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Cr. Cash
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$984
|
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To record repayment of repo obligation and related interest (security’s repurchase price) |
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Dr. Securities
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$1,000
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Cr. Securities pledged to Transferee Corp
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$1,000
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To reclassify security no longer pledged |
Transferor Corp |
Transferee Corp |
||||||||
---|---|---|---|---|---|---|---|---|---|
At inception:
|
At inception:
|
||||||||
Dr. Cash
|
$980
|
Dr. Reverse repo agreements
|
$980
|
||||||
Cr. Obligation under repo agreements
|
$980
|
Cr. Cash
|
$980
|
||||||
To record the receipt of cash and obligation under repo agreement
|
To record transfer of cash to Transferor Corp in exchange for security (noncash collateral)
|
||||||||
Dr. Securities pledged to Transferee Corp
|
$1,000
|
||||||||
Cr. Securities
|
$1,000
|
||||||||
To reclassify pledged security that Transferee Corp has the right to sell or repledge
|
Transferee Corp does not recognize the security (noncash collateral) on its balance sheet. An obligation to return the security is only recorded when Transferee Corp sells the security.
|
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Dr. Money market instrument
|
$980
|
||||||||
Cr. Cash
|
$980
|
||||||||
To record investment of cash collateral
|
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When collateral is pledged:
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When collateral is pledged:
|
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Dr. Cash
|
$980
|
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Transferor Corp does not record an entry when Transferee Corp repledges the collateral.
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Cr. Obligations under repo agreements
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$980
|
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To record the sale of the security (noncash collateral)
|
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Dr. Money market investment
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$980
|
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Cr. Cash
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$980
|
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To record investment of cash received from on-selling the security
|
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At conclusion:
|
At conclusion:
|
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Dr. Cash
|
$985
|
Dr. Cash
|
$982
|
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Cr. Interest income
|
$5
|
Cr. Interest Income
|
$2
|
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Cr. Money market instrument
|
$980
|
Cr. Money market instrument
|
$980
|
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To record results of short-term cash investment
|
To record results of short-term cash investment
|
||||||||
Dr. Securities
|
$1,000
|
Dr. Obligations under repo agreements
|
$980
|
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Cr. Securities pledged to Transferee Corp
|
$1,000
|
Cr. Cash
|
$980
|
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To reclassify security no longer pledged
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To record return of on sold security and cash collateral [note: interest expense omitted for sake of simplicity]
|
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Dr. Obligation under repo agreements
|
$980
|
Dr. Cash
|
$984
|
||||||
Dr. Interest expense
|
$4
|
Cr. Reverse repo agreements
|
$980
|
||||||
Cr. Cash
|
$984
|
Cr. Interest income
|
$4
|
||||||
To record repayment of repo principal and interest (security’s repurchase price)
|
To record the receipt of cash upon maturity (unwind) of reverse repo agreement
|
Transferor Corp |
Transferee Corp |
|||||
---|---|---|---|---|---|---|
At inception:
|
At inception:
|
|||||
Dr. Cash
|
$980
|
Dr. Reverse repo agreements
|
$980
|
|||
Cr. Obligation under repo agreements
|
$980
|
Cr. Cash
|
$980
|
|||
To record the receipt of cash and obligation under the repo agreement
|
To record transfer of cash to the repo counterparty in exchange for pledged security
|
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Transferor Corp does not reclassify the pledged security because Transferee Corp does not have the right to sell or repledge it.
|
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Dr. Money market instrument
|
$980
|
|||||
Cr. Cash
|
$980
|
|||||
To record investment of cash collateral
|
||||||
At conclusion:
|
At conclusion:
|
|||||
Dr. Cash
|
$985
|
|||||
Cr. Interest income
|
$5
|
|||||
Cr. Money market instrument
|
$980
|
|||||
To record results of short-term cash investment
|
||||||
Dr. Obligation under repo agreements
|
$980
|
Dr. Cash
|
$984
|
|||
Cr. Interest expense
|
$4
|
Cr. Reverse repo agreements
|
$980
|
|||
Cr. Cash
|
$984
|
Cr. Interest income
|
$4
|
|||
To record the repayment of repo principal and interest
|
To record the receipt of cash upon maturity (unwind) of reverse repo agreement
|
PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
Select a section below and enter your search term, or to search all click Transfers and servicing of financial assets