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FASB proposes to restrict derecognition on transfers to QSPEs

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11 Jun 2003

The US Financial Accounting Standards Board has issued an Exposure Draft proposing to restrict the circumstances in which a transferor could remove from its balance sheet financial assets that have been transferred to an off-balance sheet structure known as a qualifying special-purpose entity (QSPE).

Under the FASB proposal, an entity would not be a QSPE (and therefore the transferor would not derecognise the transferred assets) if the transferor or its affiliates or agents is obligated to deliver additional cash or other assets to fulfill the SPE's obligations to beneficial interest holders (except certain servicing advances and forward contracts to transfer additional financial assets). The IASB is addressing derecognition of financial assets in its project to Amend IAS 39, although it is not considering a QSPE approach. Also, the IASB has on its agenda a project on Consolidation and Special Purpose Entities. The IASB has not yet established a timetable for that project.

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