In quick compromise, FASB issues tighter rules on SPEs. (Assurance: technical developments, professional issues and engagement changes)

Accounting Today, February, 2003 by Glenn Cheney

NORWALK, CONN. -- Special purpose entities can't be all-purpose entities. Especially not the kind of debt-hiding entities that Enron used and abused to puff up its profits--at least not under the new guidance issued by the Financial Accounting Standards Board.

Interpretation No. 46, "Consolidation of Variable Interest Entities," expands on existing rules to more precisely specify under what conditions a parent company must consolidate an off-balance-sheet SPE. Now, the question of consolidation is a matter of who takes the risks and who reaps the rewards of the enterprise.

"These guidelines look for the person who is running the show or providing the backing," explained FASB project manager Ron Lott.

For many years, a given company would include...