{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/470/40/#05-overview-and-background","source":"FASB Accounting Standards Codification, Basic View","usage":"Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective.","topic":"470","topic_title":"Debt","subtopic":"470-40","subtopic_title":"Product Financing Arrangements","section":{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"470-40-05-1","para":"05-1","html":"
This Subtopic establishes guidance for determining whether an arrangement involving the sale of inventory is in substance a financing arrangement.
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Product financing arrangements include agreements in which a sponsor (the entity seeking to finance product pending its future use or resale) does any of the following:
  1. a
    Sells the product to another entity (the entity through which the financing flows), and in a related transaction agrees to repurchase the product (or a substantially identical product)
  2. b
    Arranges for another entity to purchase the product on the sponsor's behalf and, in a related transaction, agrees to purchase the product from the other entity
  3. c
    Controls the disposition of the product that has been purchased by another entity in accordance with the arrangements described in either (a) or (b).
","snippet":"Product financing arrangements include agreements in which a sponsor (the entity seeking to finance product pending its future use or resale) does any of the following:\n(a) Sells the product to another entity (the entity…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6c1a8c1fa25764a23aa43dfa1effd520c71500e7288b4a18a90e3b4172c8d9cd","downloaded_from":"2026-09-10T00:32:31.270Z","last_downloaded_at":"2026-09-10T00:32:31.270Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481567","source_sha256":"1f1f85916b39c821aa14a805991796663341e4f99891b19ac92eeae1c38d40f1"}},{"citation":"470-40-05-3","para":"05-3","html":"
In all of the foregoing cases, the sponsor agrees to purchase the product, or processed goods of which the product is a component, from the other entity at specified prices over specified periods or, to the extent that it does not do so, guarantees resale prices to third parties (see paragraph 470-40-15-2(a)(1)). The Implementation Guidance in Section 470-40-55 illustrates the arrangement described in (b) of the preceding paragraph. For an arrangement described in (a), see Topic 606 on revenue from contracts with customers for guidance on repurchase agreements in paragraphs
606-10-55-66 through 55-78
and an illustration on repurchase agreements in Example 62, Case A, paragraphs
606-10-55-401 through 55-404
.
","snippet":"In all of the foregoing cases, the sponsor agrees to purchase the product, or processed goods of which the product is a component, from the other entity at specified prices over specified periods or, to the extent that i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ee989b361f452ac1af79cacabaa23412f4f2e8ef26d9a5f9cc432143371e9fab","downloaded_from":"2026-09-10T00:32:31.270Z","last_downloaded_at":"2026-09-10T00:32:31.270Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481567","source_sha256":"1f1f85916b39c821aa14a805991796663341e4f99891b19ac92eeae1c38d40f1"}},{"citation":"470-40-05-4","para":"05-4","html":"
Other characteristics that commonly exist in product financing arrangements but that are not necessarily present in all such arrangements include the following:
  1. a
    The entity that purchases the product from the sponsor or purchases it directly from a third party on behalf of the sponsor was established expressly for that purpose or is an existing trust, nonbusiness entity, or credit grantor.
  2. b
    The product covered by the financing arrangement is to be used or sold by the sponsor, although a portion may be sold by the other entity directly to third parties.
  3. c
    The product covered by the financing arrangement is stored on the sponsor's premises.
  4. d
    The debt of the entity that purchases the product being financed is guaranteed by the sponsor.
","snippet":"Other characteristics that commonly exist in product financing arrangements but that are not necessarily present in all such arrangements include the following:\n(a) The entity that purchases the product from the sponsor …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d21408e8c5f94b8952174e7d37ee18d1fba35183fc5de8f000bd90e38cccbf6a","downloaded_from":"2026-09-10T00:32:31.270Z","last_downloaded_at":"2026-09-10T00:32:31.270Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481567","source_sha256":"1f1f85916b39c821aa14a805991796663341e4f99891b19ac92eeae1c38d40f1"}},{"citation":"470-40-05-5","para":"05-5","html":"
The following are similarities between a sponsor's rights and obligations under a product financing arrangement and a purchaser's rights and obligations under an unconditional purchase obligation (see Topic 440):
  1. a
    Both the sponsor and the purchaser obtain probable future economic benefits from the assured source of product.
  2. b
    Both are obligated to make future cash payments to the other party to the agreement.
","snippet":"The following are similarities between a sponsor's rights and obligations under a product financing arrangement and a purchaser's rights and obligations under an unconditional purchase obligation (see Topic 440):\n(a) Bot…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:99135683640b1edcbd26f28fc35880291bca296f31c07195d0ec16a1df3904b1","downloaded_from":"2026-09-10T00:32:31.270Z","last_downloaded_at":"2026-09-10T00:32:31.270Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481567","source_sha256":"1f1f85916b39c821aa14a805991796663341e4f99891b19ac92eeae1c38d40f1"}},{"citation":"470-40-05-6","para":"05-6","html":"
Beyond those similarities, however, there is a substantial difference in the related accounting issues. Under a product financing arrangement, the product already exists and the other entity's purchase cost is known.
","snippet":"Beyond those similarities, however, there is a substantial difference in the related accounting issues. Under a product financing arrangement, the product already exists and the other entity's purchase cost is known.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:242037841a5524f4da9fd53163c96fea21bcd8a1a0893683b69f5b7720b78600","downloaded_from":"2026-09-10T00:32:31.270Z","last_downloaded_at":"2026-09-10T00:32:31.270Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481567","source_sha256":"1f1f85916b39c821aa14a805991796663341e4f99891b19ac92eeae1c38d40f1"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:edc2ab8e494a53ecbafe4b0cd2327896a12032c5ca26d931653a53c606ec5274","downloaded_from":"2026-09-10T00:32:31.270Z","last_downloaded_at":"2026-09-10T00:32:31.270Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481567","source_sha256":"1f1f85916b39c821aa14a805991796663341e4f99891b19ac92eeae1c38d40f1"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:86b4bf214db67307f9c8273e861c24890109c4809b5d57b4d7dc6cfd69902b74","downloaded_from":"2026-09-10T00:32:31.270Z","last_downloaded_at":"2026-09-10T00:32:31.270Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481567","source_sha256":"1f1f85916b39c821aa14a805991796663341e4f99891b19ac92eeae1c38d40f1"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:86b4bf214db67307f9c8273e861c24890109c4809b5d57b4d7dc6cfd69902b74","downloaded_from":"2026-09-10T00:32:31.270Z","last_downloaded_at":"2026-09-10T00:32:31.270Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481567","source_sha256":"1f1f85916b39c821aa14a805991796663341e4f99891b19ac92eeae1c38d40f1"}}