Project Update

Transfers of Financial Assets

(Proposed Amendment of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities)

Last Updated: June 22, 2009 (Updated sections are indicated with an asterisk *)

The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.

*Project Objective
*Due Process Documents
Decisions Reached at the Last Meeting
*Summary of Decisions Reached to Date
*Next Steps
Board/Other Public Meeting Dates
Background Information
Contact Information

*Project Objective

The objective of this project was to simplify the guidance on accounting for transfers of financial assets in FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, to improve consistency and transparency in financial reporting. This project was performed in conjunction with the separate project on the reconsideration of FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities.

*Due Process Documents

FASB Statement No. 166, Transfers of Financial Assets, was issued on June 12, 2009, with the exception of Appendix C—which contains amendments to other authoritative literature. This Statement, including Appendix C, was issued on June 19, 2009.

This Statement must be applied as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. This Statement must be applied to transfers occurring on or after the effective date.

Additionally, on and after the effective date, the concept of a qualifying special-purpose entity is no longer relevant for accounting purposes. Therefore, formerly qualifying special-purpose entities (as defined under previous accounting standards) should be evaluated for consolidation by reporting entities on and after the effective date in accordance with the applicable consolidation guidance. If the evaluation on the effective date results in consolidation, the reporting entity should apply the transition guidance provided in the pronouncement that requires consolidation.

Additionally, the disclosure provisions of this Statement should be applied to transfers that occurred both before and after the effective date of this Statement.

Final Statement 

News Release

On September 15, 2008, the Board issued a revised Exposure Draft, Accounting for Transfers of Financial Assets, for a 60-day comment period. The comment period will end on November 14, 2008. This Exposure Draft is a revision of the Exposure Draft issued on August 11, 2005, and reflects the Board’s redeliberations based upon comments received from constituents and subsequent events in the credit markets.

Exposure Draft (September 2008)

Comment Letters (September 2008)

Comment Letter Analysis (September 2008)

Comment Letters (August 2005)

Comment Letter Analysis (August 2005)

Decisions Reached at the Last Meeting (May 18, 2009)

See minutes below.

*Summary of Decisions Reached to Date

See Statement 166.

*Next Steps

With the issuance of Statement 166, the Board completed its project on amendments to Statement 140.

Board/Other Public Meeting Dates

The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final Statement or Interpretation.

The following are links to the minutes for each meeting.

May 18, 2009 Board Meeting—Disclosures
April 1, 2009 Board Meeting—Disclosures
March 4, 2009 Board Meeting—Partial Sales, Measurement, and Classification of Secured Borrowings
January 28, 2009 Board Meeting—Participating Interests and Effective Control
December 17, 2008 Board Meeting—Effective Date and Transition Including Disclosures Amendments
November 6, 2008 Public Roundtable—Statement 140 and Interpretation 46(R)
July 30, 2008 Board Meeting—Effective Date and Transition Including Disclosures
July 16, 2008 Board Meeting—Fair Value Practicability Exception
June 11, 2008 Board Meeting—Comment Period, Transition, and Effective Date in Statement 140 and Interpretation 46(R)
June 11, 2008 Board Meeting—Transfers of Financial Assets: Accounting for Interests Held by the Transferor
June 4, 2008 Board Meeting—Enhanced disclosures in Statement 140 and Interpretation 46(R)
June 4, 2008 Board Meeting—Transfers of Financial Assets: Accounting for Interests Held by the Transferor
May 21, 2008 Board Meeting—Transfers of Financial Assets: Accounting for Interests Held by the Transferor
April 2, 2008 Board Meeting—Transfers of Financial Assets: Removal of Qualifying SPE Concept and Other Amendments to Statement 140
May 30, 2007 Board Meeting—Transfers of Financial Assets: Linked-Presentation Model
October 18, 2006 Board Meeting—Transfers of Financial Assets—Redeliberations Regarding Isolation
July 26, 2006 Board Meeting—Transfers of Financial Assets: Redeliberations
June 7, 2006 Board Meeting—Transfers of Financial Assets: Redeliberations
December 7, 2005 Board Meeting—Transfers of Financial Assets: Issues for Redeliberations
June 15, 2005 Board Meeting—Agenda Requests on Potential FSP: Clarification of the application of Paragraphs 40(b) and 40(c) of Statement 140
June 15, 2005 Board Meeting—Proposed Amendments to Paragraphs 35 and 40(a) of Statement 140
April 13, 2005 Board Meeting—Initial Measurement of a Transferor’s Interest in a Financial Asset and Setoff Rights
March 23, 2005 Board Meeting—Initial Measurement of a Transferor’s Interest in a Financial Asset and Setoff Rights
March 9, 2005 Board Meeting—Initial Measurement of a Transferor’s Interest in a Financial Asset and Setoff Rights
January 19, 2005 Board Meeting—Proposed Accounting for Transfers of Portions of Financial Assets
October 27, 2004 Board Meeting—Isolation and the Need for a Custodial Arrangement
September 22, 2004 Board Meeting—Isolation of Financial Assets
August 11, 2004 Board Meeting—Loan Participations and the Effect of Setoff Rights on Isolation
July 27, 2004 Board Meeting—Loan Participations and the Effect of Setoff Rights on Isolation
June 17, 2004 Public Roundtable—Qualifying Special-Purpose Entities: Legal Isolation and Setoff Rights
May 25, 2004 Public Roundtable—Qualifying Special-Purpose Entities: Legal Isolation and Setoff Rights
March 24, 2004 Board Meeting—Consideration of whether to hold a public roundtable to seek additional information from constituents about the impact of setoff rights on sale accounting for transferred financial assets
February 11, 2004 Board Meeting—Discussion of Legal Isolation and Transfers of Undivided Interests
January 21, 2004 Board Meeting—Discussion of Legal Isolation and Transfers of Undivided Interests
December 10, 2003 Board Meeting—Discussion of Issues in the Proposed Revised Exposure Draft
October 15, 2003 Board Meeting—Discussion of Effective Date and Transition Provisions, Scope of the Document Being Reexposed, and Length of Comment Period for the Exposure Draft, and Miscellaneous Issues
October 1, 2003 Board Meeting—Discussion of Issues Related to Transferor Support Commitments, Effective Date, Transition Provisions, the Distinction Between Undivided Interests and Beneficial Interests
September 24, 2003 Board Meeting—Discussion of Issues Related to Legal Isolation, Transferor Restrictions, and Equity Instruments
September 3, 2003 Board Meeting—Discussion of Approach and Reaction to Issues Raised
August 28, 2003 Board Meeting—Public Roundtable with Interested Constituents
August 20, 2003 Board Meeting—Discussion of Comments Received on the Exposure Draft
May 27, 2003 Board Meeting—Discussion of Issues Raised by SEC Staff and Others
April 30, 2003 Board Meeting—Discussion of Exposure Period and Other Issues
April 22, 2003 Board Meeting—Discussion of Permitted Activities
March 26, 2003 Board Meeting—Discussion of Project Approach
March 12, 2003 Board Meeting—Discussion of Project Scope and Approach
January 22, 2003 Board Meeting—Addition of Project to Technical Agenda

Background Information

Adding a Project to the Board’s Agenda

The Emerging Issues Task Force (EITF) discussed EITF Issue No. 02-12, "Permitted Activities of a Qualifying Special-Purpose Entity in Issuing Beneficial Interests under FASB Statement No. 140," on three different occasions during 2002 to address the following questions: (1) to what extent is a qualifying special-purpose entity permitted to determine the terms of beneficial interests issued after the inception of the qualifying special-purpose entity, and (2) if a special-purpose entity (or its designees or agent) determines the terms of beneficial interests subsequent to the initial issuance of beneficial interests in the transferred assets, is that activity consistent with the requirements that a qualifying special-purpose entity's activities be "significantly limited" and "entirely specified" in connection with Issue 02-12? The Task Force was unable to reach a consensus after three meetings and, as a result, the Board decided to add this project to its technical agenda on January 22, 2003.

A Proposed Amendment to Statement 140

In addition to addressing the permitted activities of a qualifying special-purpose entity, the Board became aware of other practices that may permit a transferor to derecognize a financial asset, but without the same limitations placed on similar transactions that required a qualifying special-purpose entity to obtain sale treatment. The Board concluded that Statement 140 does not provide straightforward guidance on whether a qualifying special-purpose entity is required for a particular transaction and that amending the guidance on when a qualifying special-purpose entity must be used would (1) improve comparability, (2) simplify the guidance on activities of qualifying special-purpose entities, and (3) improve consistency in the application of Statement 140. The Board also decided to examine whether the existing guidance for applying paragraphs 9(a) and 9(b) of Statement 140 is sufficient for transactions involving portions of financial assets. The Board identified other aspects of Statement 140 that needed amendment, clarification, or simplification. As a result of these conclusions, the Board decided to develop an amendment to Statement 140.

A proposed amendment to Statement 140 was issued as an Exposure Draft in August of 2005. A total of 53 comment letters were received from respondents to the Exposure Draft. The majority of respondents generally objected to the changes proposed by the Exposure Draft. The Board decided to redeliberate significant issues raised by respondents prior to the issuance of a final amendment (see Summary of Decisions Reached to Date).

Alternative to Removal of the Qualifying Special-Purpose Entity

In its continuing effort to address issues relating to the permitted activities of a qualifying special-purpose entity, the Board considered several approaches, one of which would limit the activities of a qualifying special-purpose entity to those that involve only basic servicing and restrict the permitted assets and liabilities of a qualifying special-purpose entity to those financial instruments that are passive (in a strict sense of the term). For various reasons, respondents were nearly unanimous in their reluctance to support a strict interpretation of the concept of passivity (as proposed in the model) as a workable solution to the issues in this project. Based on comments received and additional research by the staff, it became evident that applying this model would result in financial reporting similar to a complete removal of the qualifying special-purpose entity concept. The Board decided not to continue forward with this approach as a feasible alternative.

Contact Information

Patricia Donoghue
Project Manager
padonoghue@fasb.org