The Financial Accounting Standards Board released a fourth FASB Staff Position last Wednesday addressing fees paid to the decision maker and/or guaranty provider in a variable interest entity, and how this impacts the expected loss or expected residual return analysis.
This most recent FIN 46-related FSP, a 13-page document called No. 46-d, is several pages longer than the one-to-two page FSPs posted on FASB's Web site the week prior, and includes an illustration of the EL/ERR analysis when fees are involved. In FSP No. 46-b, which went out the prior week, the board indicated that fee-collecting decision makers that own no other variable interests in a deal should defer implementing FIN 46 pending further guidance. FSP 46-d seems to reason that the fees paid to a decision maker or a guaranty provider should be considered part of the net income or loss of the VIE, and therefore should be considered in both the EL and the ERR analysis. Comments are due Oct. 10.