The Financial Accounting Standards Board’s (FASB) call for consolidation of special purpose entities (SPEs) could prove to be a difficult hurdle for the U.S. asset-backed commercial paper (ABCP) market during the second-half of 2002, according to Fitch Ratings ‘ABCP Trends & Advances’ newsletter. FASB issued an exposure draft in June 2002 (Accounting Research Bulletin No. 51) that called for the creation of an accounting standard that provides for consolidation of SPEs. Associated enterprises that do not have voting majority or equity interests but otherwise control an SPE through financial support could be affected by the new proposal. This and other regulatory hurdles have affected the ABCP market as outstandings were trimmed from a record high of $745.3 billion as of year-end 2001 to $709.1 billion as of Aug. 31, 2002. ‘Plans for the launch of several new vehicles have been put on hold, and existing issuers have seen new transaction volume slacken in comparison to recent years,’ said Darryl Osojnak, Senior Director, Fitch Ratings. ‘With the impact of the FASB’s exposure draft on ABCP programs still unclear, a number of would be conduit sponsors are waiting in the wings.’
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