ASF, SIFMA Oppose 'Q' Elimination

By Ed Zwirn

The ink is barely dry on the Financial Accounting Standards Board's proposal to eliminate the use of the qualified special purpose entity as a means of segregating assets off balance sheet, but industry critics are already appealing to Congress in an effort to avoid the measure.

FASB in April agreed as part of these rewrites to eliminate QSPEs, an accounting device that has come under much criticism over the past several years, with critics saying the practice has contributed to corporate scandals such as Enron by allowing losing or volatile positions to be obscured.

FASB Chairman Robert Herz himself has placed his full clout behind the proposed elimination of the ‘Q' as part of the board's rewrite of FAS 140 and FIN 46R, connecting QSPEs to the sub-prime mortgage crisis and stating pointedly that the vehicles into which riskier loans had been packaged were “ticking time bombs.”

Now, with the Sept. 15 release of the exposure draft containing this rewrite a fait accompli, the American Securitization Forum and the Securities Industry and Financial Markets Association, which had written to FASB in July seeking delay, are continuing their opposition. Continued...