the total assets of the SPE, unless there is clear and compelling evidence to the
contrary. (Prior to the proposed Interpretation, practice interpreted 3% to be suf-
ficient equity.)- Requires an SPE’s Primary Beneficiary to consolidate an SPE unless the SPE’s
equity owner(s) bears all of the exposure to the first dollars of loss and its po-
tential rewards are unlimited.
(k) Bifurcation Issues. The FASB is also expected to issue an amendment to FAS
133 in the latter part of 2002, which may require, in certain situations, the holders of
beneficial interests in SPEs/QSPEs to bifurcate their interest into a debt or equity
host and a derivative. For example, when fixed rate assets are transferred to a QSPE
that issues floating rate senior beneficial interests and a residual interest, the resid-
ual interest would be required to be recorded as a debt instrument and an interest rate
swap.
21.7 DISCLOSURES FOR SECURITIZATION TRANSACTIONS AND RELATED ASSETS.
In response to growing concern expressed by analysts and investors over the ade-
quacy of disclosures surrounding financial asset transfers, particularly the securitiza-
tion of financial assets, the FASB developed disclosures to help users adequately as-
sess the risk involved with such transactions.
If the entity has securitized financial assets during any period presented and ac-
counts for that transfer as a sale, for each major asset type (e.g., mortgage loans,
credit card receivables, and automobile loans) it should disclose:
- Its accounting policies for initially measuring the retained interests, if any, in-
cluding the methodology used in determining their fair value (i.e., quoted mar-
ket prices, prices for similar assets, or other valuation techniques) - The characteristics of the securitization (a description of the transferor’s contin-
uing involvement with the transferred assets, including, but not limited to, serv-
icing, recourse, and restrictions on retained interests) and the gain or loss from
the sale of financial assets in the securitization - The key assumptions (which may be disclosed as a range for multiple securiti-
zations of a single asset type) used in measuring the fair value of retained inter-
ests at the time of securitization (including, at a minimum, quantitative infor-
mation about discount rates, expected prepayments including the expected
weighted-average life of prepayable financial assets, and anticipated credit
losses, if applicable) - Cash flows between the securitization SPE and the transferor, unless reported
separately elsewhere in the financial statements or notes (including proceeds
from new securitizations, proceeds from collections reinvested in revolving-pe-
riod securitizations, purchases of delinquent or foreclosed loans, servicing fees,
and cash flows received on interests retained)
If the entity has retained interests in securitized financial assets at the date of the
latest statement of financial position presented, for each major asset type (e.g., mort-
gage loans, credit card receivables, and automobile loans) it should disclose:
- Its accounting policies for subsequently measuring those retained interests, in-
21 • 20 ASSET SECURITIZATION