I am a data engineer in Finance. Recently I am suffering from understanding financial terms and its accounting treatment. One big issue is, as a frequently used term, Repo and Rev Repo I understand them several times, but after a period not touching the terms and related data I will forget almost all of the details. And then have to revisit the definitions and relink them to financial activities.
For example, recently I am involved in a meeting talking about Repo Fails transactions. User wants to know what’s the exact accounting policy we applied in our data logic. My first reaction is, how to identify the Repo in our Fails data, however, Fails will only record as Fail to deliver or Fail to receive. The only way to find a Repo is from the trading account. We maintain certain accounts for Repo trade only. Question is I even can’t have a clear filter to scope which accounts are Repo or not.
It takes me almost a whole day to look into firm’s internal documentation to understand what the user means and how our data pipeline process it. Then, with these background, I joined the meeting. In the meeting, I listened carefully but didn’t fully comprehend what the user means as lot’s of non Tech terms. Fortunately I got something like below
For a repo trade how it is recorded in accounting
On Trade date (T0)
Dr (i.e., Assets in BS): Repo
Cr (i.e. Liabilities in BS): Rev Repo
On T1 if settled successfully
Dr: Receivables ???
Cr: Cash ???
On T1 if settlement failed
Dr: Failed to Deliver
Cr: Payables
On TX(usually no longer than 5 calendar days) if settlement success
Dr: Receivables
Cr: Cash
This time my understanding for memory: Repo means repurchase, we should provide securities to the client and client give us money. And by someday (possibly overnight), we need to return the money + interest to client. So the money measured assets is still on our side on trade date. We recorded an assets repo and liabilities Rev repo. If not failed, user doesn’t mentioned. If failed, we failed to deliver the securities to client and thus we record FTD in ledger, by this time , it already lose the ability to track whether the trade is related to Repo or not, we just know it’s fails and needs trading account level information to know whether it is a repo trade. Once this fails finally got settled, we record receivables in Assets and we got cash from client but record payables in future.
Additionally, we have repo control accounts, customer control accounts that store all these misc temporary trade activities and will be cleared to 0 finally.
Ok, now I got a very detailed explanation this time. But after a period, I will forget and have to repick these details when user reaches months later.
How I can have these details memorized in my mind so next time it can be automatically presented in my eyes when user reaches months later and asked for another related question?