Under the next Finance Bill outlined in last week's U.K. pre-budget report, U.K. domiciled securitization SPVs will be allowed to continue applying U.K. GAAP accounting standards to securitization SPVs. Researchers at Deutsche Bank Securities explained that under the international accounting standards -- IAS 39 -- the main standard dealing with derivatives and debt would have potentially compromised the bankruptcy remote nature of U.K. based SPVs by introducing tax liabilities.

 

"IAS 39, which is due to be introduced in 2005, is based on the so-called 'mixed valuation model' where certain liabilities are carried at fair value," reported researchers. "Thus SPVs may have been required to mark their derivative exposures (basis swap, currency swap, etc) to market, which would have potentially resulted in tax liabilities for the SPV."

 

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