Friday, June 12, 2009

FASB Issues FAS 166, 167 Amending FAS 140, FIN 46R on Securitizations, SPEs

Earlier today, the Financial Accounting Standards Board issued a press release announcing the publication of Statement of Financial Accounting Standards No. 166 (FAS 166), Accounting for Transfers of Financial Assets (an amendment of FAS 140), and FAS 167, Amendments to FIN 46R. (FIN 46R is: Consolidation of Variable Interest Entities.) FASB has also posted a briefing paper giving a brief, plain English explanation of the new standards.

As noted in FASB's press release, the new standards, "will change the way entities account for securitizations and special-purpose entities [SPEs]." In terms of effective date, FASB notes: "Both Statements 166 and 167 will be effective at the start of a company’s first fiscal year beginning after November 15, 2009, or January 1, 2010 for companies reporting earnings on a calendar-year basis."

Although the standards will apply to all types of companies, they are expected to potentially have the greatest impact on financial institutions which enter more frequently into the types of transactions (e.g. securitizations, SPEs and certain other asset transfers) that are within the scope of the standards. Therefore, FASB adds that the new standards "will impact financial institution balance sheets beginning in 2010." FASB also notes that the impact of the impending changes under FAS 166 and FAS 167 were taken into account by regulators in the recent stress tests conducted on the largest banking institutions by bank regualtors. FASB adds that the new standards "were initiated at the request of investors, the SEC, and The President's Working Group on Financial Markets."

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