Account 171 – Government bonds purchased for resale  

1. Rules for accounting

a) This account is used to record transactions in government bonds purchased for resale incurred during a period. This account only records value of agreement on resale of Government bonds, not records coupons received by buyer on the behalf or seller in conformity with times specified in the agreement.

b) The enterprise must comply with regulations on types of transactions, deadlines for transactions and revenues from Government bonds in the resale transactions prescribed in financial regime in force on resale of Government bonds.

c) The buyer of bonds under resale agreement shall not record ‗coupon payment‘ received from the seller to revenues account at the times during the term of repurchase agreement but record to other payables or receivables account. Structure and contents of account 171 – Government bond repos (Repurchase agreements on Government bonds)

Debit: - Value of government bonds repurchased by seller at the maturity date of the agreement;

- Value of government bonds purchased by the purchaser when the government bond repo takes effect;

- Difference between the resale price and the original purchase price of Government bonds under the government bonds received by purchaser.

Credit: - Value of Government bonds resold by the purchaser at the maturity date of the agreement; - Value of government bonds sold by the seller when the government bond repo takes effect; - Difference between the original sale price and the repurchase price of Government bonds under the government bonds paid by the seller.

Debit balance: Value of government bonds held by the purchaser to the maturity.

Credit balance: Value of government bonds held by the seller to the maturity.  

3. Method of accounting for several major transactions:

3.1. Accounting for government bonds‘ sellers under repo

a) When the government bond repo takes effect, the following accounts shall be recorded: Dr 111, 112 (sale price) Cr 171 – Government bond repos.

b) Periodically, the seller shall distribute the difference between original sale prices and repurchase price of government bonds to expenses as follows: Dr 635 – Financial expenses (other than securities company) Cr 171 – Government bond repos (distributing time in conformity with time of agreement)

c) On the maturity date of the government bond repo, the seller shall make payment specified in the government bond repo and receive those securities, and then the following accounts shall be recorded: Dr 171 – Government bond repos Cr 111, 112 (repurchase price specified in the repo).

d) When the purchaser pays for coupons which the purchaser keeps on behalf of the seller at the times during the term of the repo, the seller shall record as follows: Dr 111, 112, 138 Cr 515 – Financial incomes (other than securities company) (numbers of coupon payments of bonds).

3.2. Accounting for government bonds‘ purchasers under repo

a) When the agreement takes effect, according documents on cash disbursement and other documents, the following accounts shall be recorded: Dr 171 – Government bond repo Cr 111, 112 (purchase price)

b) Periodically, the purchaser shall distribute the difference between original purchase price and resale price of government bonds to revenues as follows: Dr 171 – Government bond repo Cr 515 – Financial incomes (other than securities company) (allocated according to duration of agreement).

c) When receiving coupon payments of bonds from the seller at the times during the term of the repo, the following accounts shall be recorded: Dr 111, 112, etc. Cr 338 – Other payables or receivables (3388).

d) When the agreement expires, the following accounts shall be recorded: Dr 111, 112, 138 Cr 171 – Government bond repo. Concurrently, when repaying coupons of bonds which the purchaser keeps on behalf of the seller at the times during the term of repo, the following accounts shall be recorded: Dr 338 – Other payables or receivables. Cr 111, 112, etc.  

Source: Circular 200