FASB Discusses Definition of Public Entity, Transfers of Assets

June 7, 2006

FEI Summary

At its June 7, 2006 board meeting, the Financial Accounting Standards Board (FASB) agreed the staff could issue guidance on the definition of a public entity. FASB also began redeliberations of its 2005 Exposure Draft (ED) on transfers of financial assets. A majority of respondents objected to changes proposed in the ED, and FASB agreed to redeliberate a number of issues, dropping two issues from the scope of the ED. Further details are below.

“Definition of Public Entity” for Conduit Debt Coming in Proposed FSP FAS 126-a

At the June 7 FASB board meeting, the FASB board agreed the staff could release proposed FSP FAS 126-a, “"Revision to the Definition of a Public Entity to Include an Obligor for Conduit Debt Securities." The scope of the FSP (FASB staff position) would include Industrial Revenue Bonds and other debt issued by non-public or public entity obligors through a non-public conduit, such as a municipality.  The proposed FSP will have a 45-day comment period, and will be treated as a change in accounting principle, with retrospective application.  The proposed FSP will be posted to FASB’s website. Further details are on the last page of today’s [June 7] board handout.

FASB Begins Redeliberation of Proposed Standard on Transfers of Financial Assets

Also at the June 7 FASB board meeting, the board began redeliberations of its 2005 Exposure Draft (ED)  entitled, “Accounting for Transfers of Financial Assets – an Amendment of FASB Statement No. 140”. FASB’s comment letter summary notes a majority of respondents objected to the changes proposed in the ED. Rather than drop the project altogether, the board voted today to drop certain issues from the scope of the project, including initial measurement, and limitations on derivatives held by a Qualifying Special Purpose Entity (QSPE). The other issues contained in today’s board handout will continue to be redeliberated.