Qualified Special Purpose Entities (QSPE’s) days appear to be numbered. When new FASB guidance is issued in June 2009, effective sometime in the beginning of 2010, it will eliminate the exemption from consolidation for QSPE’s. This was announced in a FASB briefing document issued May 18th.
This change in direction will, in essence, eliminate QSPE’s, which have been a tool primarily used by banks to keep assets off their balance sheets through a process called securitization. The process of moving assets off the balance sheet involved the repackaging of loans into securities which were sold off to investors.
Consolidation will now center on “effective control” along with increased usage of “fair value” accounting. Once this change goes into effect, look for banks to potentially move substantial amounts of assets back on their books.
This change in direction will, in essence, eliminate QSPE’s, which have been a tool primarily used by banks to keep assets off their balance sheets through a process called securitization. The process of moving assets off the balance sheet involved the repackaging of loans into securities which were sold off to investors.
Consolidation will now center on “effective control” along with increased usage of “fair value” accounting. Once this change goes into effect, look for banks to potentially move substantial amounts of assets back on their books.
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