02-28-2008, 05:22 PM
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Respected members,
Our contribution on the mainstream Accounting and Auditing threads are diminishing day by day, instead we are indulging each other in useless debates etc. I believe that for the benefits of all the members, we shall contribute more on the technical issues.
I'd like to draw member's views on one of the most crictical issues of our time, the Special Purpose Entities (SPE) ad its consolidation under SIC 12.An SPE is an entity that is created usually to accomplish a narrow and well-defined objective, such as the securitisation of financial assets or the sale and leaseback arrangements.
IAS 27 prescribes consolidation when one entity is able to control another entity. Control (as defined by IAS 27) is normally presumed when parent acquires more than one half of the voting rights or power to govern operating & financial policies or appointment of majority members of BOD. However, the standard have no explicit guidance on the consolidation of SPEs.
An enterprise's control in an SPE may be established in a way that the enterprise may not necessarily own any of the SPE's equity. The SPEs are created with legal arrangements that impose restrictions on their independent decision making. SIC 12 provides that an SPE should be consolidated when in substance it is being controlled.
I've seen examples of companies (back in Pakistan), where there are such arrangements exist between the entities but have never been consolidated, neither any observations were raised. </font id="Georgia">
Respected members,
Our contribution on the mainstream Accounting and Auditing threads are diminishing day by day, instead we are indulging each other in useless debates etc. I believe that for the benefits of all the members, we shall contribute more on the technical issues.
I'd like to draw member's views on one of the most crictical issues of our time, the Special Purpose Entities (SPE) ad its consolidation under SIC 12.An SPE is an entity that is created usually to accomplish a narrow and well-defined objective, such as the securitisation of financial assets or the sale and leaseback arrangements.
IAS 27 prescribes consolidation when one entity is able to control another entity. Control (as defined by IAS 27) is normally presumed when parent acquires more than one half of the voting rights or power to govern operating & financial policies or appointment of majority members of BOD. However, the standard have no explicit guidance on the consolidation of SPEs.
An enterprise's control in an SPE may be established in a way that the enterprise may not necessarily own any of the SPE's equity. The SPEs are created with legal arrangements that impose restrictions on their independent decision making. SIC 12 provides that an SPE should be consolidated when in substance it is being controlled.
I've seen examples of companies (back in Pakistan), where there are such arrangements exist between the entities but have never been consolidated, neither any observations were raised. </font id="Georgia">
