Historical frame
- Kind
- scandal
- Period
- Late 2007 through 2008; examiner report issued 2010
- Jurisdiction
- United States
Repo 105 illustrates how a reversible period-end transaction can change the balance-sheet snapshot and leverage presentation without proportionately changing ongoing economic exposure.
Questions to carry forward
- What changed at period end, what reversed afterward, and which leverage view would a reader reasonably need?
- How do accounting classification, transaction purpose, timing, and disclosure contribute different parts of the analysis?
Claim disciplineEvidence boundaries
- The source is SEC testimony summarizing a court-appointed examiner report, not a final judicial accounting ruling.
- The entry does not treat all repurchase agreements or all sales-accounting conclusions as equivalent.
The Lehman examiner described transactions called Repo 105 that Lehman treated as sales. Assets left the reported balance sheet, the cash was used to reduce liabilities near period end, and the transactions later reversed. SEC testimony reported that this temporarily reduced displayed leverage by tens of billions of dollars and was not disclosed as the testimony said readers were told repos were treated as financings.
The analytical discipline is to build a timeline. Record the transfer, cash, liability reduction, reporting date, repurchase or replacement, and post-period reversal. Then calculate both the reported snapshot and a clearly labeled view that restores the temporary financing exposure.
An analyst adjustment does not itself establish GAAP noncompliance. It answers a decision question about durable leverage; classification and disclosure conclusions require their own authority and evidence.