The Emerging Issues Task Force briefly discussed tentative changes to the permitted activities of QSPEs issuing beneficial interests (dubbed EITF 02-12) under FASB Statement No. 140, some of which could potentially be conducive to SPEs that act as commercial paper conduits, as well as other types that theoretically fail tests based on discretion over the interests issued to third parties.
The board asked for the staff to acquire more market information, and will revisit the discussion at the next meeting, which has yet to be posted on the FASB's calendar.
According to an issue summary previously distributed by the EITF, one reason for revisiting QSPEs is that "FAS 140 does not specify whether either (a) the conditions for a qualifying SPE require that the terms of beneficial interests to be issued be specified at inception of the entity or (b) the qualifying SPE (or its designee or agent) may establish the terms of replacement beneficial interests."
Among several other views, EITF proposes that QSPEs should be able to determine "terms, rates or durations" of interests within ranges specified in the legal documentation of the SPE. This would potentially include the power to change the duration of CP issued out of a conduit. Another proposed view would allow the QSPE to accept additional assets if it benefits the beneficial interest holders and if it adheres to the documentation.
EITF proposes, however, that the transferor should not be allowed to direct a QSPE to prepay previously issued interests with proceeds from newly issued interests, nor would the QSPE have the discretion to exercise options.
The EITF is a special unit under FASB, made up of industry accountants, who focus on specific issues born out of existing guidelines.