Solution

This contract includes a "call option," giving the entity the right to repurchase the asset. In this situation, the transaction is likely a financing arrangement instead of a sale according to IFRS 15.

The consideration for the repurchase agreement is more than the original selling price, and the customer is essentially providing financing to the entity. Therefore, the transaction should be accounted for as a financing arrangement rather than a sale of a good.

Under IFRS 15, if a contract gives an entity the right to repurchase an asset (a call option), the transaction is accounted for as a lease if the repurchase price is less than the original selling price, and as a financing arrangement if the repurchase price is equal to or more than the original selling price.

In this case, the original sale of the asset would not be recognized as revenue. Instead, the cash received from the customer would be recognized as a liability reflecting the obligation to return the customer's cash in the future. The asset would continue to be recognized on the entity's balance sheet. The difference between the initial amount received and the amount to be paid in the future would be recognized as interest expense over the period.