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Under Ind AS 109, a SALE AND REPURCHASE agreement where the repurchase price is a FIXED PRICE or the sale price plus a lender's return results in:
APartial derecognition — only the principal portion is removed
BTRANSFER of substantially all risks and rewards — full derecognition
CContinuing involvement — both asset and liability retained pro-rata to risk
DRETENTION of substantially all risks and rewards — the financial asset is NOT derecognised
Answer & Solution
Correct answer: D. RETENTION of substantially all risks and rewards — the financial asset is NOT derecognised
A repo at a fixed price (or sale price + lender's return) is economically a SECURED FINANCING — the transferor retains the upside/downside of the asset's market value. Substantially all risks and rewards retained → no derecognition. The cash received is recorded as a borrowing. Same for sale + total return swap that transfers market risk back to the entity.
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