Repo 105 was the accounting technique Lehman Brothers used to temporarily reduce reported debt.
Repo 105 transactions were repurchase agreements structured so that Lehman treated them as sales rather than financing. Before publishing financial statements, the investment bank could transfer securities for cash and use that cash to reduce liabilities on its balance sheet. It later repurchased the securities, meaning the economic effect resembled short-term borrowing.
The technique became widely known after Lehman Brothers collapsed in September 2008. Bankruptcy examiner Anton Valukas’s 2010 report said Lehman used Repo 105 transactions to remove tens of billions of dollars from its reported balance sheet at quarter-end. The report also examined the roles of executives, auditors, and lawyers. Repo 105 is not the same as ordinary repurchase financing; the controversy concerned its classification and use to create a misleading appearance of lower leverage.