Abstract:
Repurchase agreement tends to happen when a company needs to boost their money supply. Since its appearance in the early 1900s, repo has been debatable due to the complex nature of this account. Current accounting standard sets the regulation to account repo transaction as secured borrowings. However, this standard failed to present the fair price of assets used in repo which resulted in the risk of price changes. This research proposed the new approach to value the asset used in repo transaction as its fair value. Two banks were analyzed for this approach and the result shows there is a significant price difference between this approach with the current accounting standard. This research suggests the fair value approach to be used in measuring repo transaction since this approach is in accordance with IFRS 9 – Financial Instrument.
