Yesterday (April 2, 2008), FASB voted to remove the Qualified Special Purpose Entity (QSPE) concept (used for some securitizations) from FAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, and to remove the related scope exception from FIN 46R, Consolidation of Variable Interest Entities (VIEs). In addition to removing the QSPE concept, the board also approved amendments to the derecognition criteria in paragraph 9 of FAS 140 (changes shown in redline form on pages 1-2 of the board handout), and agreed to provide guidance on the ‘unit of account’ as relates to when a ‘portion’ of an asset can be derecognized - by requiring essentially the same characteristics as proposed in FASB’s 2005 Exposure Draft of proposed amendments to FAS 140 with respect to the definition of ‘participating interest,’ (definition appears on pages 3-4 of the board handout). FASB's project page currently states an amended Exposure Draft (ED) is expected to be released in the second quarter of 2008; in my estimation, the proposed changes decided yesterday are likely to be included in that ED or in a separate proposal document. Read more about these and related developments here.
Posted by Edith Orenstein, FEI Financial Reporting Blog, April 3, 2008.