Under a redirect or call option, the customer cannot order the use of the asset to obtain all the benefits, indicating that the customer has no control over the installation. As a result, the entity does not count revenues when it transfers assets, but continues to record assets and record liabilities in its accounts. Forwards and call options are accounted for based on the fact that the repurchase price is more or less the original selling price: under a put option, the customer may require the entity to repurchase the asset by exercising the option. With this option, the customer can enjoy all the benefits of the installation, indicating that the debitor has control of the installation. The put options are accounted for according to one of the three options, based on (1) if the repurchase price is more or less than the original selling price, (2) if the repurchase price is more or less than the expected market value and (3) if the customer has a significant economic incentive to make use of the option The entity should take into account the current value of the money. The effects of the present value of the money may be significant enough for the accounting to be changed from a financing agreement to a lease agreement. The accounting for these pension transactions is explained in the following sections. Pension transactions are accounted for in different ways depending on the type of repurchase transaction and the terms of the contract. In the case of leasing and calling options, the repurchase price is compared to the original sale price to determine whether the transaction should be considered as a leasing or financing agreement.
In the put options, the repurchase price is compared to the initial sale price and the expected market value of the asset at the end of the contract, to determine whether the transaction should be counted as a lease, financing contract or return sale. ASC 606 has significantly changed the focus of the retirement operations guidelines and has become easier. This should simplify some of the ambiguous situations that are currently occurring under asc 605. Retirement transactions come in three different forms: financing agreements receive the same accounting treatment as forwards and call options. The accounting treatment of sales with return rights goes beyond the scope of this article, but it is dealt with in detail in the return and acceptance rights of customers. The following diagram provides a complete overview of the accounting process for pension transactions. Generally speaking, a customer has a strong incentive to exercise an option when the repurchase price is expected to exceed the market value of the goods at the time of redemption. Because this assessment requires estimates, management must exercise good judgment in determining the factors that are included in this assessment.