A pension contract (PR) is a short-term loan in which both parties agree to the sale and future repurchase of assets within a certain contract term. The seller sells a treasury order or other state security with the promise to repurchase them at a given time and at a price that includes an interest payment. Finally, ASU 2014-11 is also extending advertising obligations for the advertising of financial assets recorded as sales, as well as certain transfers recorded as guaranteed bonds (Abhinetri Velanand, Shahid Shah and Adrian Mills, "FASB makes limited changes to its Guidance Board accountant," Deloitte Heads Up, June 19, 2014). In the case of transactions or pension agreements marked as sales, information should be provided on the amounts of accounting, the amounts received for the guarantees, the outstanding commitments of the agreement and an explanation of the corresponding amounts recorded on the balance sheet. In addition, bonds issued for all transactions and pension agreements in the form of secured bonds must include disclosure of security, remaining commitments and a risk assessment. Retirement transactions are usually short-term transactions, often literally overnight. However, some contracts are open and do not have a fixed due date, but the reverse transaction is usually done within one year. While a pension purchase contract involves a sale of assets, it is considered a loan for tax and accounting purposes. The parts of the repurchase and reverse-repurchase agreement are defined and agreed upon at the beginning of the agreement. The value of the security is generally higher than the purchase price of the securities.
The buyer agrees not to sell the security unless the seller comes from his late part of the agreement. On the agreed date, the seller must repurchase the securities, including the agreed interest rate or pension rate. Repo is a form of guaranteed loan. A basket of securities serves as an underlying guarantee for the loan. Securities law is transferred from the seller to the buyer and returns to the original owner after the contract is concluded. The most commonly used guarantees in this market are U.S. Treasury bonds. However, government bonds, agency securities, mortgage-backed securities, corporate bonds or even shares can be used in a repurchase transaction.
In June 2014, the FASB released the 2014-11 Accounting Standards Update (ASU), Transfers and Servicing (theme 860): pension transactions to maturity, pension financing and disclosures. The revised rules require companies to deduct securities repurchase transactions (TMRs) as guaranteed obligations. An RTM is a pension contract by which the securities are due on the same day the pension contract ends.