ASF, SIFMA Seek Delay on QSPE Rule

By Ed Zwirn, Staff Writer

By Ed Zwirn, Staff Writer

The American Securitization Forum and the Securities Industry and Financial Markets Association have called for a delay of the Financial Accounting Standards Board's rewrite of statement FAS 140 and Interpretation 46(R).

Arguing that the FASB rewrite, which prominently includes the elimination of qualified special purpose entities, would be “likely to swell the balance sheets of the affected entities, impairing financial ratios and financial covenant performance and regulatory capital tests,” the two groups sent a joint letter to the FASB last week calling for a “more measured and realistic but still aggressive deadline,” such as Jan. 1, 2010.

“We do not believe that a year-end 2008 deadline is a necessary response to current market conditions,” stated the letter, co-signed by ASF Executive Director George Miller and SIFMA EVP Randy Snook. “The risks of too much haste are high.” 

According to the letter, the aggregate outstanding balance of potentially affected securities of Dec. 31, 2007,  included $7.2 trillion of mortgage-related securities, nearly $2.5 trillion of other asset-backed securities (excluding asset-backed commercial paper) and $816.3 billion of asset-backed commercial paper.

FASB in April agreed upon elimination of so-called qualified special purpose entities (QSPEs), an accounting practice that has generated much criticism in the wake of Enron and other, more recent financial scandals.

According to the latest board decisions, the exposure draft release of the revised FAS 140 is now planned for the third quarter. There will be a 60-day comment period.

Project Manager Patricia Donoghue has said that the draft is being revised after comments from external reviewers and board members and will be rewritten this week into a pre-ballot draft for board approval.

The board has decided that the revised statement FAS 140 would be effective for fiscal years beginning after Nov. 15.

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Posted on July 22, 2008