The temporary acquisition of an asset consists of the purchase of an economic resource with a mandatory resale commitment. This, at a future date set at the time of making the respective contract.
Thus, after the agreed term, the asset returns to the seller. However, the buyer will have to pay a higher price than the one paid by the buyer.
Normally this type of transaction commits government securities such as Treasury Bills or State Bonds.
It should also be noted that the difference between the first purchase price and the resale price constitutes the acquirer's profitability. Meanwhile, whoever grants the temporary assignment of the asset obtains greater liquidity in the short term.
Types of temporary acquisition of assets
There are two types of temporary acquisition of assets :
- Simultaneous: A simple purchase / sale and another exchange to be carried out in the future is agreed at the same time. Both transactions will take place between the same participants, at a price set in advance and for the same asset.
Between the initial purchase and resale, the acquirer becomes the owner of the title. For this reason, you can carry out sub-operations such as the temporary transfer of the resource to a third party.
- Repo : A purchase / sale is agreed with the commitment to undo the operation at a certain future date. The acquirer does not have ownership of the asset, that is, it is as if temporarily investing in a financial security.
In practice, both cases are very similar, although they receive a differentiated accounting treatment. To know more about it, check the differences between repos and simultaneous.
Profit from the temporary acquisition of an asset
The temporary acquisition of assets is normally between an individual and a financial entity, who is the owner of the transferred title.
The instruments most used for this type of operations correspond to public debt. This represents a lower risk and in turn pays relatively low interest.
Thus, the acquisition of assets is an operation without much exposure to uncertainty, but also without high profitability.
To understand it better, suppose that a temporary, simultaneous acquisition of government bonds is made. The entity that transfers the asset also waives the collection of the respective coupons. In return, you receive resources that you must repay in the future by adding interest.