Securitization certainly seem to be a hot topic!  We had a big turnout for yesterday’s Round Table Discussion, with over 20 people coming in-world for the discussion and even more than that streaming the event live from the web.  I think people were hoping to hear lots of informative and stimulating discussion and, if they were like me, they were not disappointed!  Special thanks to Cathy Shakespeare and Akwasi Ampofo for taking the time to share their highly specialized knowledge and insight with the rest of us.  If you didn’t get the chance to catch the discussion live, be sure to check out the archived version, which is now available here.

Despite all of the high-powered brains in the room, there were still some questions left unresolved.  In particular….

1.    Why is the concept of ‘participatory interest’ important?

2.    Why should the legal form of an arrangement matter so much?  Paragraph 26.C.b suggests that economically equivalent arrangements can be accounted for differently depending on, for example, whether a firm retains an interest-only strip (transferring the rest to others) or buys an interest-only strip (with the remainder still being held by others).

We are hoping to get some feedback/insight on these issues from the FASB staff, so be sure to check back here in a day or two to read what we have been able to find out.

In the meantime, feel free to weigh in on how you thought the session went.  What were the insights that you took away?  What topics sparked your interest?

One of the topics of discussion that I found particularly interesting was the discussion of the three basic philosophies in deciding the appropriate accounting treatment for securitizations – namely, taking a 1) risk and rewards, 2) control, or 3) financial components approach.  Historically, the FASB has adopted more of a control approach, whereas the IASB has taken a risk and rewards approach.  I think the FASB would benefit from some insight on the positive and negative aspects of emphasizing the risks and rewards as opposed to control.  What would be helpful are clear examples of how differences in accounting treatment will arise when based on one approach vs another.  If you have any such examples or, if you just want to weigh in with your opinion, please do so by commenting below!

Again, be sure to check back on updates to this post and/or to check out the archive if you haven’t seen it yet – or maybe you just want to revisit a particular part of the discussion that didn’t get completely absorbed in your head the first time around!

Disclaimer: The views expressed here are my own and do not represent positions of the Financial Accounting Standards Board. Positions of the FASB are arrived at only after extensive due process and deliberations.