The transaction involves sale of a marketable security to a third-party buyer, with the buyer's having an option to "put " the security back to the seller at a specified future date or dates for a fixed price. Because of the put option, the seller generally receives a premium price for the security. The issues are whether the seller-transferor should account for the transfer as a sale or as a borrowing and, if the transfer is accounted for as a borrowing, whether impairment of the asset should be recognized. EITF DISCUSSION The Task Force reached a consensus that the accounting should be based on an assessment of the probability that the put option will be exercised. If it is probable that the put option will be Copyright © 2010, Financial Accounting Standards Board Not for redistribution Page 1exercised, the transaction should be accounted for as a borrowing (any difference between the "sale " proceeds and the put price would be accrued as interest expense, and any impairment of the underlying security would generally not be recognized). [Note: See Issue 1 in STATU
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