The staff noted that the Board had previously agreed that when an entity (the 'Investor'):

• (a) has the power to determine the strategic operating and financing policies of another entity ('Power Criterion ');
• (b) has the ability to benefit ('Benefit Criterion'); and
• (c) is able to use that power so as to increase, protect or limit the risk of downside in that benefit

The Board discussed how this definition would apply to an entity (called an SPE for discussion purposes) where the policies and significant decisions are predetermined and the predetermination is effectively permanent and immutable or unchangeable.

The staff proposed that the entity that predetermines the policies and significant decisions would meet the Power Criterion in the definition.

The Board agreed but noted that this may only be applied to a small set of circumstances and will need to be developed further.

The staff further proposed that an entity that subsequently accepts the predetermined issues will also meet the Power Criterion.

The Board agreed.

The staff noted that circumstances may exist where it is difficult to determine the application of the Power Criterion. The staff asked the Board to consider that in these circumstances control could be determined based on who is exposed to the residual risks of the SPE's assets.

The Board noted that this could be considered in determining who controlled the particular individual asset but highlights the difference in control over entities and individual assets.

The Board noted that an identification of risks and rewards within the SPE approach may have merit and should be explored further.