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Consolidation of Special Purpose Entities (SPEs)

Date recorded:

The Board was notified that FASB is proposing to add an additional exception to the basic principle for consolidation of an SPE -- when the SPE was established principally to diversify risk. Three criteria will be proposed, and the SPE should be consolidated if any two are met. The three criteria are (although this may change):

1. The investor has broad discretionary powers over the purchase and sale of the SPE's assets; 2. The investor provides guarantees or back-up borrowing arrangements; and 3. The investor provides fees that are not market based.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.