The Next Accounting Controversy

The Next Accounting Controversy - 4/30/2009

Home

Index of Filings

News and Press Releases

Filings

Decisions

Settlements

Litigation Activity Indices

Top Ten List

Annual/Quarterly Updates

Clearinghouse Research

Articles & Papers

Search

Related Sites

About Us

Local Rules

Sponsors

Register

_______________
Copyright © 2001
Stanford Law School

2009 News and Press Releases

SEARCH

News	News 2009
HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

HEADLINE NEWS:

The Next Accounting Controversy, Standard-Setters Have Moved On From Fixing Fair-Value Rules And Have Set Their Sights On Off-Balance-Sheet Accounting And Loan-Loss Provisioning.
Marie Leone

CFO.com. April 30, 2009
_________________________________________________________________________

EXCERPT: Revisions to how companies account for off-balance-sheet items and loan-loss provisions will knock fair-value accounting off the front page with respect to financial reporting, according to James Kroeker, acting chief accountant at Securities and Exchange Commission. Further, new guidance on these topics set to be released by the Financial Accounting Standards Board and the International Accounting Standards Board will "change the financial-reporting landscape," he told the audience during an industry conference today. Regarding off-balance vehicles, Kroeker expects this type of structured finance to continue to evolve but believes the elimination of qualified special purchase entities — or QSPEs — and forthcoming guidance will go a long way to change the sometimes questionable nature of off-balance-sheet activity by requiring companies to focus on the true economic substance of transactions. FASB recently ousted the concept of a QSPE from U.S. accounting literature and its reworking of FAS 140 and FIN 46(R) for new guidance to be released later this year. Kroeker, who was speaking at a financial-reporting conference sponsored by Baruch College, noted that the key issue regarding off-balance sheet accounting stems from corporate balance sheets that have been weighed down by underperforming assets, such as subprime mortgages. He also pointed out that guidance being prepared by FASB and IASB related to FAS 140 and FIN 46(R) focuses on control issues. Specifically, the aim of the guidance will, among other things, be to eliminate the appearance that there is joint control of off-balance-sheet assets when in reality, the original owner retains the risk. Without the QSPEs, the off-balance-sheet vehicles that gave banks and other companies a way to keep securitized assets off their balance sheets, banks and others will have to absorb the hidden losses. Changes to FIN 46(R) will provide new, more stringent criteria for when banks are allowed to transfer ownership of securitized assets and liabilities.

Back to News page | Back to Archived News 2009 page | Back to Top

�