This paper is based on a case of Green Prince; a canary specializing in no-chemical vegetables which has other companies is caught in a demand and supply situation which has resulted in certain legal matters being created alternatives were discussed and finally one option was chosen in order to alleviate this problem.
The case revolved around a situation of demand and supply in which the company was caught in a situation as a result of a agreement which by no law or principle was fair to the customer.
The issue or the matter of content in this case is the fact that the price would be decided at some future date which goes against the fundamental rules of the principles laid out by the Financial Standards Accounting Board(FASB). According to the principles laid out by the FASB, the security has to be bought from the lender at a fixed price at a certain date.
In this case, the scenario is obviously different as the repurchase agreement is such that the price would be fixed at some future date. Hence, that is not in accordance with the Statement 140 of the FASB principles.
Some of the plausible alternatives can be quoted from the scenarios in one such scenario analysis depicted by the FASB principles. In the first alternative, the dealer could enter into an agreement with the customer b entering into a note receivable which has full recourse value. The note would be returned to the dealer by the customer and hence, full cash payment would effectively be received by the customer.
In the second alternative, the customer could enter into a repurchase agreement with the dealer. The customer would be obligated to repurchase the security at some future date at some fixed price within a certain time period. Some of the collateral would also have to be taken care of, including some of the upfront payments by the customer.
The research strategy for this particular case included looking up various cases and Statements on the FASB website which allowed the search to become much more precise and simpler otherwise. The research had to be focused on Statements which only dealt with the repurchase agreements terms and cases. The research strategy focused on findings on those areas which allowed the customer to earn appropriate revenue without being in a position of being cash strapped and having financial credit issues.
The research that was carried out for this purpose was done along the lines of the FASB principles and it allowed an overall legal analysis of the situation while at the same time provided various scenario analyses. The alternative that was chosen as a more plausible option was option A as it would allow the customer to receive full value of their money and their investment would also be recovered as well.
At present, the situation is such that Green Prince are being treated to an unfair repurchase agreement which has not allowed them to take advantage of the fixed price option as they ought to .
Hence, the note receivable would allow this company to manage its supply and demand situation more appropriately.
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