Brazil remaining the predominant player. However, due to the problems in Argentina,
the immediate future of the Latin American securitization market is uncertain.
(a) International Accounting Standards. The International Accounting Standards
Committee (IASC) issued IAS 39, “Financial Instruments: Recognition and Mea-
surement,” in March 1999. IAS 39 became effective for financial statements cover-
ing financial years beginning on or after January 1, 2001.
The guidance in IAS 39 is similar to U.S. GAAP in most areas. The concepts
within the two frameworks are very comparable, with the primary difference being
that U.S. GAAP involves more extensive detail regarding application of the princi-
ples than international accounting standards (IAS). The implementation guidance is
also considerably more developed within U.S. GAAP than is the case with IAS. The
primary differences between IAS 39 and the concepts embodied within U.S. GAAP
include:
- U.S. GAAP requires a financial asset to be legally isolated from a transferor to
allow it to be derecognized by that enterprise (a “true sale at law” concept). This
concept applies even when the enterprise is in bankruptcy. IAS 39 has no such
requirement. - U.S. GAAP includes a concept of a “qualifying special-purpose entity,” which,
if used in connection with a securitization, avoids considerations about whether
risks and rewards have been transferred to determine who should consolidate the
SPE. IAS 39 does not differentiate between types of special purpose entities,
and all securitization structures must include a transfer of the risks and benefits
of ownership to achieve derecognition. - The treatment of gains and losses on subsequent measurement of available-for-
sale financial assets is different in that IAS 39 provides an option to record such
gains and losses either directly in equity or to report them in net profit or loss
for the period. U.S. GAAP requires all gains and losses on available-for-sale in-
vestments to be reported as a separate component of equity.
(b) Japanese GAAP. The Japanese accounting rules for securitization of financial
assets are also very similar to FAS 140. According to Japanese GAAP, a financial
asset should be derecognized if the contractual right that represents the financial asset
is exercised, if the right is lost, or if control over the right is transferred to others.
Control over the contractual right that represents the financial asset is transferred to
others when all of the following conditions are met:
- The transferee’s contractual right on the transferred financial asset is legally se-
cured from the transferor and its creditors. - The transferee can enjoy benefits in an ordinary manner directly or indirectly
from the contractual right on the transferred financial asset. - The transferor, in substance, does not have a right and an obligation to repur-
chase the transferred financial asset before the maturity date of the asset.
Like IAS 39, perfection against the originator of the assets is not required so that
there remains still risk of offset of transferred assets with transferor’s obligations (if
21 • 24 ASSET SECURITIZATION