In a reverse repurchase agreement, what assets should a government report?

In a reverse repurchase agreement, the government engages in a transaction where it sells securities to a counterparty with the agreement to repurchase them at a later date for a specified price. This type of transaction is commonly used to obtain short-term funds, and it is essential to understand how to report the associated assets.

When reporting in such a scenario, the government should include both the collateral securities that it has provided to the lender and the cash proceeds it received from the initial sale of these securities. The reason for this dual reporting is to reflect the full economic impact of the transaction on the government's financial position.

The collateral securities provided to the lender are still recognized as an asset because they represent a commitment by the government to repurchase those securities in the future. On the other hand, the cash proceeds from the reverse repurchase agreement should also be reported as they constitute an important element of liquidity for the government.

In summary, the correct answer encompasses both the collateral securities and the cash proceeds, as both represent assets that are relevant to understanding the financial implications of the reverse repurchase agreement. This comprehensive view is vital for accurate financial reporting and portrays the government’s obligations and resources effectively.