Revenue – ifrs 15 handbook

A forward or a call option
If an entity has an obligation (a forward) or a right (a call option) to repurchase an asset, 
then a customer does not have control of the asset. This is because the customer is 
limited in its ability to direct the use of, and obtain the benefits from, the asset despite 
its physical possession. If the entity has an obligation or a right to repurchase the 
asset for less than its original sales price, then it accounts for the entire agreement 
as a lease, unless the contract is part of a sale-and-leaseback transaction. Conversely, 
if the entity has an obligation or a right to repurchase the asset for an amount that is 
greater than or equal to the original sales price, then it accounts for the transaction as 
a financing arrangement. When comparing the repurchase price with the selling price, 
the entity considers the time value of money.
If a repurchase arrangement that would otherwise be accounted for as a lease is 
part of a sale-and-leaseback transaction, then the entity continues to recognise the 
asset and recognises a financial liability for any consideration received. The entity 
accounts for the financial liability under the financial instruments standard.
IFRS 15.B68–B69, B75
In a financing arrangement, the entity continues to recognise the asset and 
recognises a financial liability for any consideration received. The difference 
between the consideration received from the customer and the amount of 
consideration to be paid to the customer is recognised as interest, and processing 
or holding costs if applicable. If the option expires unexercised, then the entity 
derecognises the liability and the related asset and recognises revenue.
Yes
No
Asset repurchased for less than original selling price?
Forward
(a seller’s obligation to repurchase
the asset)
Call option
(a seller’s right to repurchase
the asset)
Lease arrangement
1
Financing arrangement
The customer does not obtain control of the asset
1. Unless the contract is part of a sale-and-leaseback transaction.

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5 Step 5 – Recognise revenue when or as the entity satisfies a performance obligation | 153
5.5 Repurchase agreements
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IFRS 15.B70–B71