FASB decides to eliminate QSPEs and modify consolidation model

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20 Jun 2008

The US FASB has decided to amend its Statement No. 140 'Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities and Interpretation No. 46(R) Consolidation of Variable Interest Entities' to make the following important changes, among others:

  • Remove the concept of a qualifying special-purpose entity (QSPE) from Statement 140 and the related scope exceptions from Interpretation 46(R)
  • Changes the derecognition provisions in paragraph 9 of Statement 140
  • Modify the consolidation model in Interpretation 46(R)
As a result, if those decisions become final, previously unconsolidated entities may have to be consolidated. Also, because of the potential modifications to the existing Interpretation 46(R) model, enterprises involved with variable interest entities (VIEs) (even VIEs that are not structured finance vehicles) will need to rethink their previous consolidation conclusions. The FASB is expected to issue an Exposure Draft for public comment on the amendments to Statement 140 and Interpretation 46(R) in IQ 2008. All of the details are in Heads Up Newsletter 18 June 2008 (PDF 182k) from Deloitte & Touche LLP (United States).


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