Abundance Of Caution Being Applied To Securitizations, Auditor Tells FASB Roundtable

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By Edith Orenstein, FEI Financial Reporting Blog -
A Big 4 auditor told a FASB roundtable yesterday that his firm is applying ‘an abundance of caution’ in determining the impact of any implicit obligations of banks or other issuers in connection with off-balance sheet vehicles. The roundtable was convened by FASB for feedback on its proposed changes to securitization and related consolidation standards, including the Proposed amendment to FAS 140, and Proposed amendment to FIN 46R.

Among the proposed changes are removal of the concept of Qualified Special Purpose Entities (QSPEs), a structure used to obtain off-balance-sheet treatment for certain mortgage and other securitizations; this change has been reported to potentially add back trillions of dollars of mortgage-related and other assets to financial institutions and others. The proposed effective date for these changes is 2010.

The comment deadline on the proposed amendments to the securitization rules is November 14; FASB Technical Director Russell Golden said they are anxiously awaiting comments and will move rapidly to redeliberate the proposals. Separately, he noted that FASB would begin redeliberations next week on the separate proposal containing disclosures that may be required as early as this year-end (Proposed FSP FAS 140-e and FIN 46R-e); the comment deadline on the disclosure proposal was October 15.

Read more highlights from the FASB roundtable here.

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