Thursday, October 30, 2008

FASB To Hold Roundtable Nov. 6 On Proposed Securitization Changes

Today’s FASB Action Alert announced that FASB will hold a roundtable on Thurs. Nov. 6 on its proposed changes to securitization and related consolidation rules. Specifically, the roundtable will feature respondents to FASB’s Exposure Drafts (ED) released earlier this year, including the Proposed Amendment of FAS 140 on Transfers of Assets, and the Proposed Amendment of FIN 46R, Consolidation of Variable Interest Entities. Although the proposed changes to recognition and measurement of balance sheet and income statement items in those proposals would not take effect until 2010 (technically, the beginning of each reporting entity’s first fiscal year that begins after November 15, 2009), FASB concurrently proposed enhanced disclosures that would take effect ‘as soon as practicable’ (meaning, potentially, this year end or early next year), set forth in Proposed FSP FAS 140-e and FIN 46R-e.

The proposed amendments to the accounting standards listed above include removal from FAS 140 of the concept of a Qualifying Special Purpose Entity (QSPE) – a vehicle used for some mortgage securitizations and other securitizations - and removal of the related exception that had been provided for QSPEs from applying the consolidation rules set forth in FIN 46R.

These proposed changes have been widely reported to potentially add back billions if not trillions of dollars of securitizations back on the balance sheets of financial institution and potentially other types of companies who used these vehicles to sell assets. See, e.g. “FASB Delays Rule Affecting Trillions in MBS,” by National Mortgage News Online (July 31, 2008) which said FASB considered (and later agreed) to move the date of its proposed changes to the securitization rules out another year (to 2010), and cites a letter from Rep. Spencer Bachus (R-Ala.) to FASB, which said “changes to securitization accounting potentially affects $10.5 trillion in securitized assets, including $7.2 trillion in mortgage-related securities.”

You can read the comments on proposed changes to FIN 46R, and comments on proposed changes to FAS 140; so far the comment file is light because the comment deadline is November 14; it is likely that constituents appearing on next week’s roundtable will file their comment letters by November 6. Separately, there are 30 comment letters on the proposed disclosures right now, because the comment deadline on the disclosure proposal was October 15.

If you are following the proposed changes to the securitization rules, and other proposals affecting the financial reporting landscape, come to FEI’s Current Financial Reporting Issues Conference Nov. 17-18 in NYC. Keynote speakers include SEC Chairman Christopher Cox, FASB Chairman Robert Herz, and IASB Chairman Sir David Tweedie. Technical update sessions at CFRI will feature senior staff of the SEC, FASB and IASB along with leading financial executives and auditors. Find out more at . And, check out our related programs taking place in NYC that week: FEI’s Hall of Fame Gala at the New York Stock Exchange Nov. 17, and IFRS: Strategies for a Single Set of Standards, sponsored by Deloitte Nov. 19. COMING SOON: Our blog will be moving to google blogger in November, you can take a sneak peak here; watch this space for updates! Enter your email address here if you’d like to receive our blog by email.

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