FASB Issues Statement on Securitizations

Norwalk, CT, September 28, 2000—The Financial Accounting Standards Board will issue tomorrow Statement 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. The new Statement replaces Statement 125, issued in June 1996.

"When Statement 125 was applied in practice to securitizations of financial assets such as credit card balances and trade receivables, several accounting issues arose about special-purpose entities and about rights to get transferred assets back from them," explains FASB Senior Project Manager Halsey Bullen. "It also became clear that better disclosures were needed about securitizations and something different was needed for collateral, and that a new Statement was needed to deal with those matters."

In recent years, transfers of financial assets in which the transferor has some continuing involvement with the transferred assets or with the transferee have grown in volume, variety, and complexity. Those transfers raise the issues of whether transferred financial assets should be considered to be sold and a related gain or loss recorded, whether the assets should be considered to be collateral for borrowings, or whether the transfer should be accounted for at all. Statement 125 addressed those issues, but further issues arose in implementation. Statement 140 resolves those implementation issues, but it carries forward most of Statement 125's provisions without change.

Statement 140 is effective for transfers occurring after March 31, 2001 and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000.

An analysis of the effect of this Statement on various Emerging Issues Task Force issues and a draft Special Report on the FASB's staff's answers to questions that arose in implementing Statement 125, updated to reflect Statement 140, will be available on this web site.

Copies of Statement 140 are available for purchase through the FASB Order Department, telephone (800) 748-0659.