The FASB issued its much-anticipated proposals to amend the rules governing the securitization of financial instruments and balance-sheet consolidation on September 15, 2008.

Issued in two exposure drafts (EDs) and one proposed FASB Staff Position (FSP), the combined effect of the amended guidance would be a sharp restriction on the use of off-balance sheet accounting for securitized debt.

The first piece of new guidance would amend Statement of Financial Accounting Standards (SFAS) No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities, which established the conditions that an entity must meet to be a qualifying special purpose entity (QSPE). The proposed guidance, ED No. 1610-100, Accounting for Transfers of Financial Assets: An Amendment of FASB Statement No. 140, would remove special accounting rules for QSPEs and instead require financial institutions to move hundreds of billions of dollars of asset-backed securities back onto their balance sheets.

In ED No. 1620-100, Amendments to FASB Interpretation No. 46(R), the FASB is proposing stricter guidelines that would require additional assessments to determine which entity receives the benefits from the assets?and thus should include them in its financial statements The proposed changes in ED No. 1610-100 and ED No. 1620-100 would be effective at the beginning of each reporting entity?s first fiscal year that begins after November 15, 2009.

The Board is soliciting comments on its amendments for SFAS No. 140 and FIN No. 46(R) through November 14 and has announced plans to hold a public roundtable on November 6 to further discuss the proposals.

The FASB's interim remedy, until the amendments to SFAS No. 140 and FIN No. 46(R) become effective, is the proposed FSP No. FAS 140-e and FIN 46(R)-e, Disclosures about Transfers of Financial Assets and Interests in Variable Interest Entities.

The guidance would require financial institutions to provide additional disclosures about transfers of financial assets and also amends FIN No. 46(R) to require public enterprises to give additional disclosures about their involvement with variable interest entities.

The Board is seeking feedback on proposed FSP No. FAS 140-e and FIN 46 (R)-e through October 15.