Inventory sale and repurchase

[ConfussedA]

Hi All

I am going to keep this anonymous for now. The facts are as follows:

1. We sold (full title per the contract) the value of the raw materials in our finished goods to a financial institution (not our normal retail type customer and technically not and output from our business as it is the value of the raw materials - not IFRS15) at the market price, which is very liquid and quotable, this raw material (even though converted to finished goods form) retains it's value as a raw material based on current market price, which fluctuates.
2. It is stored at an approved warehouse by the financial institution, it is a third party warehouse, not ours, with access only on their permission.
3. If we want to sell the goods to our customers, we have to repurchase it from the financial institution in advance based on operational estimate, who then sends a release to the the third party warehouse to release for sale, so we can ship to our customers, the warehouse cannot release without instructions from the financial institution.
4. We repurchase the goods at the spot rate on the day requested based on the financial institutions quote.
5. We pay the institution a % fee based on the market value of the raw material held.
6. We pay the storage and insurance costs at the third party warehouse.
7. The agreement can be terminated in 1 month by either party and If walked away tomorrow we would not be liable to repurchase the inventory and the financial institution would have to deal with the inventory at the warehouse.
8. If we default on the fees, they can cut us off from repurchasing the inventory to sell to our customers.
9. The tricky bit is what if a) they give us a 3 month exclusive right to repurchase the inventory, even if they retain title, but are limited to selling to us for that period, OR b) not give us any right, just the option to repurchase.

If you need more info and I have left anything out, please let me know and I will also update.

Appreciate the help in advance.

[Marek Muc]

I've moved your post to a new topic. You can still view the original discussion here: viewtopic.php?t=355

[JRSB]

Interested to hear where you are with it currently ConfussedA. Do you think it's a genuine sale in substance?