This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

SEC report on off-balance sheet arrangements and SPEs

  • United States (old) Image

16 Jun 2005

The US Securities and Exchange Commission has released a Staff Report on Off-Balance Sheet Arrangements, Special Purpose Entities, and Related Issues.

The report was prepared pursuant to Section 401(c) of the Sarbanes-Oxley Act of 2002 and, as required by that Act, has been submitted to the President and several Congressional committees. The staff report includes an analysis of the filings of issuers as well as an analysis of pertinent US generally accepted accounting principles and Commission disclosure rules. The report includes several recommendations for potentially sweeping changes in current accounting and reporting requirements for pensions, leases, financial instruments, and consolidation:

  • Pensions: The staff recommends the accounting guidance for defined-benefit pension plans and other post-retirement benefit plans be reconsidered. The trusts that administer these plans are currently exempt from consolidation by the issuers that sponsor them, effectively resulting in the netting of assets and liabilities in the balance sheet. In addition, issuers have the option to delay recognition of certain gains and losses related to the retirement obligations and the assets used to fund these obligations.
  • Leases: The staff recommends that the accounting guidance for leases be reconsidered. The current accounting for leases takes an 'all or nothing' approach to recognizing leases on the balance sheet. This results in a clustering of lease arrangements such that their terms approach, but do not cross, the 'bright lines' in the accounting guidance that would require a liability to be recognized. As a consequence, arrangements with similar economic outcomes are accounted for very differently.
  • Financial instruments: The staff recommends the continued exploration of the feasibility of reporting all financial instruments at fair value.
  • Consolidation: The staff recommends that the Financial Accounting Standards Board continue its work on the accounting guidance that determines whether an issuer would consolidate other entities – including SPEs – in which the issuer has an ownership or other interest.
  • Disclosures: The staff believes that, in general, certain disclosures in the filings of issuers could be better organized and integrated.
Click to download:

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.