FASB Seeks Clarity on Definition of A Public Entity
What is a public entity? Or, more specifically, is a conduit bond obligator with publicly traded conduit debt securities considered a public entity?
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A conduit municipal bond is an offering by a governmental entity that is not for its own use but for the use of a private party (conduit bond obligator). The types of private entities that can be involved in conduit municipal bond transactions are limited to certain not-for-profit entities including hospitals, museums, and libraries, etc., as well as certain for-profit entities for whom the debt is issued in the form of an industrial revenue or development bond. In some instances, conduit municipal bonds are traded on a domestic or foreign stock exchange or on public or over-the-counter markets.
On June 15, 2006, the Financial Accounting Standards Board (FASB) issued a proposed staff position (FSP) defining an obligator or debtor of a conduit municipal bond traded on a public exchange or market as a public entity. The proposed FSP would amend APB Opinion No. 28, Interim Financial Reporting; FASB Statements No. 69, Disclosures about Oil and Gas Producing Activities; No. 126, Exemption from Certain Required disclosures about Financial Instruments for Certain Nonpublic Entities; No. 131, Information and No. 141 Business Combinations.
The FASB invites individuals and organizations to send written comments on all matters in this proposed FSP. The deadline for submitting comments regarding this proposal is July 31, 2006.
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