Despite the groundswell of comments in support of a broad-based deferral of Financial Interpretation No. 46 until it is finalized, the Financial Accounting Standards Board did not address this possibility at its Dec. 10 meeting due primarily to time constraints, sources said. The Board tentatively plans to discuss this possibility at this Wednesday's meeting, according to Ernst & Young's summary of the deliberations, in its Accounting Alert.

Also this Wednesday, the board will discuss whether a further-modified FIN 46 needs to be re-exposed for comments prior to final issuance. Perhaps the most significant securitization-related development, however, was the tentative ruling on the treatment of guarantor and decision-maker fees.

"The decision on decision-maker's fees was not unanimous, yet it is a major victory for those CDO collateral managers who don't also hold significant amounts of equity or mezzanine classes," said Marty Rosenblatt of Deloitte & Touche following the meeting. "Unfortunately, they had to go through a year of pain and suffering to get to this point."

The board changed its previous stance that decision-maker fees, and fees to certain guarantors, be included in the expected residual return analysis at their face value. Instead, these fees will be treated like any other variable interests, and only their variability will be included in the expected residual return calculation.

Also, the board expanded the scope of the "information out," allowing this exemption to apply to questionable VIEs created before Dec. 30, 2003, E&Y states in its summary.

Comment letters

While the majority of the comment letters came from those

submitting in the franchise industry early after the draft was released, the banks, industry associations, accounting firms and other financial-service providers chimed in at the last minute, as is their modus operandi. The comment deadline was Dec. 1, which was

the date most of these letters were


Proponents of a deferral, based on the opinions of two board members not with FASB during the initial drafting of FIN 46, included the American Securitization Forum, The Bond Market Association (jointly with ASF), the America Institute of Certified Public Accountants, BDO Seidman, Merrill Lynch, Deloitte & Touche, Morgan Stanley and a handful of others.

"[W]e strongly believe that this guidance should not be issued until the key issues in FIN 46 have been addressed and incorporated into the ED," wrote Merrill in its comments.

Meanwhile, the board decided to postpone the reissue of a draft of the amendment to FAS 140 until next year. Reportedly, on the topic of QSPEs and FAS 140, board member G. Michael Crooch commented that existing discrepancies could easily be resolved by eliminating QSPEs entirely.

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