Securitization Accounting 11th edition
assets at fair value on a recurring basis under Accounting Standards IFRS 10:BC80 provides an example of a receivables securitization.
Securitization Accounting
IFRS 10:BC80 provides an example of a receivables securitization where the primary purpose of the entity is to allocate credit.
eba report on significant risk transfer in securitisation under articles
The accounting treatment of NPE securitisations. 48. 4.2.2. Pre- and post-securitisation own Figure 6: An example of an NPE securitisation transaction.
Fair Value Accounting and Gains from Asset Securitizations: A
securitization is “gain on sale” accounting.) Our sample consists of firms that retain an interest in the receivables that is less than 100 percent of the
140Securitization Accounting under FASB 140
Just when we thought we had mastered FASB 125 the Financial Accounting 33
Securitization Structured finance solutions
1.4 The state of the EU securitization market One example of an instance where the ... The tax and accounting advisor analyses.
Securitisation – the great accounting debate:*
Securitisation – the great accounting debate: Conduits – 'on or off' balance sheet under IFRS • PricewaterhouseCoopers.
Do Managers Time Securitization Transactions to Obtain Accounting
on sale" treatment has several accounting benefits such as reducing leverage increas- For example
Securitisation: reducing risk and accounting volatility IFRS 9 and
The diagram below provides an illustrative example of a synthetic securitisation which may be able to achieve this. How would Transaction A work? Synthetic
Securitisation: reducing risk and accounting volatility IFRS 9 and
The diagram below provides an illustrative example of a synthetic securitisation which may be able to achieve this. How would Transaction A work? Synthetic
7813 - Scott - Open Mobile Survey Graphics - Deloitte US
Jan 20 2014 · As the securitization market continues to recover and evolve we remain strong in our belief that accounting issues will play a significant role in securitization and in many ways remain embedded in the foundation of various changes in the regulatory environment
Asset Securitization - United States Secretary of the Treasury
have combined to make asset securitization one of the fastest growing activities in the capital markets The growth rate of nearly every type of securitized asset has been remarkable as have been the increase in the types of companies using securitization and the expansion of the investor base
What is a Securitization of Assets? Definition Concept and Examples -
Securitization of Assets lSecuritization is the transformation of an illiquid asset into a security lFor example a group of consumer loans can be transformed into a publically-issued debt security lA security is tradable and therefore more liquid than the underlying loan or receivables
Fair Value Accounting and Gains from Asset Securitizations: A
The accounting rules for securitizations give managers considerable discretion over the size of the reported gains from securitizations This discretion comes in part from ambiguity in the accounting rules over what is meant by “fair value” as well as discretion over the discount rates
III ACCOUNTING FOR CREDIT CARD SECURITIZATIONS - FDIC
III ACCOUNTING FOR CREDIT CARD SECURITIZATIONS INTRODUCTION This section provides an overview of the accounting criteria for establishing sales treatment under Financial Accounting Standards Board (FAS) Statement No 140 Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (FAS 140)in the
What does securitization mean?
- What Is the Meaning of Securitization? "Securitization" refers to the process of turning assets into securities – financial instruments that can be readily bought and sold in financial markets, the way stocks, bonds and futures contracts are traded.
What is securitization theory?
- Securitization theory explains how political actors and elites declare an issue to be an existential threat to legitimatize whatever practices necessary to combat the emergent risk (Wæver 1995).
What is a true sale in a securitisation context?
- What is a true sale in a securitisation context? What is a securitisation? A securitisation is a financing technique used to finance the ownership or sale of types of assets that would otherwise be difficult to finance or sell (ie 'illiquid' assets such as bilateral loans and mortgages and other loans to natural persons).
What is securitization in banking?
- “Securitization is a process by which financial institutions create additional liquidity on the backing of their existing assets through the sale of financial instruments”. As business expands the need for various types for finance also increases.
Banking & Capital Markets
Securitisation -
the great accounting debate:*Conduits - 'on or off' balance sheet under IFRS
Securitisation - the great accounting debate: Conduits - 'on or off' balance sheet under IFRS • PricewaterhouseCoopers
Securitisation - the great accounting debate: Conduits - 'on or off' balance sheet under IFRS • PricewaterhouseCoopers
Assets are sold by various originators
at a discount to cover both primary credit enhancement and interest.The conduit, a special purpose entity
('SPE') ring fences these assets and the originator receives deferred consideration where losses do not exceed the credit enhancement.It is assumed in this paper that no assets
of the 'sponsoring' bank are included.A liquidity provider is put in place for
occasions when commercial paper issuance is not possible due, for instance, to market disruption. In some circumstances it can also cover credit losses.A programme-wide credit enhancement
('PWE') is also put in place to ensure the conduit receives a high short-term rating. This often takes the form of a letter of credit.In practice the liquidity provider and
programme wide enhancement may be provided by the 'sponsoring bank'.This sponsoring bank may also receive
fees either from the conduit or direct from the originators. The conduit fund funds its purchases usually usingCommercial Paper ('CP').
Accounting issue
The accounting issue that arises under
IFRS is whether any party should
consolidate the conduit? The primary accounting pronouncement that addresses this is IAS 27 and its interpretation SIC 2 but consideration of IAS 39 is also required. SIC2 deals specifically with when a
SPE should be consolidated. It will in due
course be subsumed into IAS 27(R).The fundamental concept of IAS 27 is
that you consolidate those companies or vehicles that you control.Introduction
A typical multi-seller conduit has the following structureConduit Originators
Issues
Commercial
PaperOriginators
Deferred
considerationAssets sold
at discountOriginators
Liquidity
providerProgramme-wide
enhancementSource: PricewaterhouseCoopers
2 Securitisation - the great accounting debate: Conduits - 'on or off' balance sheet under IFRS • PricewaterhouseCoopers Securitisation - the great accounting debate: Conduits - 'on or off' balance sheet under IFRS • PricewaterhouseCoopers 3
A key control test of IAS 27 is who
controls the financial and operating policies of the company. SIC2 has four tests which indicate when
a SPE may be consolidated which expand these concepts. In outline, a company should consolidate an SPE if: (i) it is undertaking activities on its behalf and it benefits from this (ii) it effectively controls the SPE (iii) it has the majority of the risks of the SPE (iv) it receives the majority of the benefits of the SPEThese tests are indicators of control
and need to be considered together, for instance it might make no sense to consolidate a vehicle under tests (i) and (ii) if a company has absolutely no economic interest in the vehicle.The risk criteria
We will first consider criterion (iii) the 'risk
test'. To understand and analyse the risk matrix of the conduit we first have to analyse the position of the originators.To do this we need to consider IAS 39.
Under this standard each originator needs
to consider if they can derecognise the assets transferred to the conduit or not.To do so the originator would need to
show that it has not retained 'substantially' all the risks and rewards of the assets.Given the high rating of the conduit and
the level of credit enhancement required to support this, it will, in practice, be very rare for the originator not to have retained substantially all the risk and rewards and hence maintain the assets on its balance sheet. The corollary to this is the conduit recognising a loan to the originator rather than the assets legally acquired.To return, therefore, to the conduit and
an analysis of its risks. The conduit has a series of high quality loans to a variety of originators, funded by CP and supported by PWE and a liquidity facility. In this analysis risk will generally occur if the loans default and the key question is who bears the majority of this risk.Clearly in the first instance it will not be the
CP holders. On the face of it the PWE will
bear the risk and the provider of the PWE should consolidate the conduit. In practice the liquidity provider may take some risk share and the exact terms of this facility should be considered.Turning briefly to the other
SIC 12 criteria
Criterion (iv) looks at who has the majority
of the benefits of the conduit. Benefits arise in the form of interest payments to the CP holder, possibly derivative payments and various fees. How you assess and compare benefits is complex but in many cases will show a 'sponsoring bank' receives the majority of the variable benefit.Criteria (i) and (ii) are more judgemental.
If you ask the question why is the conduit
in operation you might well conclude that it is there to enable the sponsoring bank to lend to its clients. Therefore the conduits activities are carried out on behalf of the sponsoring bank, it benefits through fees and should consolidate.Again in practice the sponsoring bank will
manage the conduit on a day-to-day basis and it will be difficult to demonstrate that de facto it does not control the conduit unless the conduit has the unlimited power to 'kick out' the sponsor.Therefore, where the sponsoring bank
also provides liquidity support and PWE, it almost certainly will need to consolidate the conduit.2 Securitisation - the great accounting debate: Conduits - 'on or off' balance sheet under IFRS • PricewaterhouseCoopers Securitisation - the great accounting debate: Conduits - 'on or off' balance sheet under IFRS • PricewaterhouseCoopers 3
If, however, these roles are shared with
third parties the analysis becomes more difficult and it may be possible to demonstrate nobody controls the conduit.Does the accounting matter?
For many sponsoring banks the
accounting will only matter if it affects regulatory capital. This will depend on individual country regulators. To date the French regulator seems to have decided to adopt an accounting approach and require full capital backing against the consolidated assets. On the other hand the Dutch regulator appears to be adopting a Basel II approach, ignoring the accounting and requiring capital backing against the PWE and liquidity facility.To facilitate this the rating agencies are
developing rating methodologies to rate liquidity facilities. This latter approach is the one adopted in the short term by the US authorities when FIN 46 was implemented.Restructuring possibilities
A number of European conduits sponsors
who do not want to consolidate their conduits are looking to see if something akin to Expected Loss Notes ('ELN') helps in this regard.ELNs were developed by US companies
to avoid consolidation under FIN 46 and there are a number of potential investors in such notes active in the market.These notes would be structured so
that the PWE does not take the majority of the risks as analysed using FIN 46 type technology. Using the analysis it can usually be shown that, by issuing a relatively small level of ELNs, the majority of the risk moves away from the PWE as does enough benefit to bring the sponsor below 50 per cent.Two important warnings should, however,
be given to this approach:Whilst ELNs may work within the rigid
rules of FIN 46, SIC2 is a much
more 'substance'-based standard and issuing a small level of ELNs may not pass the 'sniff test' of SIC 2.ELNs will only handle the risk criteria
of SIC2 and possibly some of the
benefit criteria. The activity and control criteria of IAS 27 and SIC2 will
remain a real challenge.Peter Jeffrey
PricewaterhouseCoopers (Europe)
44 20 7804 52
4 peter.c.jeffrey@uk.pwc.comRoland Jeanquart
PricewaterhouseCoopers (Belgium)
32 2 7
0 4024
roland.jeanquart@be.pwc.comAnik Chaumartin
PricewaterhouseCoopers (France)
335657 8038
anik.chaumartin@fr.pwc.comDirk Stiller
PricewaterhouseCoopers (Germany)
49 40 6378
295dirk.stiller@de.pwc.com
Emil Yiannopoulos
PricewaterhouseCoopers (Greece)
30 20 687 4640
emil.yiannopoulos@gr.pwc.comPadraic Joyce
PricewaterhouseCoopers (Ireland)
353792 6394
padraic.joyce@ie.pwc.comFedele Pascuzzi
PricewaterhouseCoopers (Italy)
39 02 806 46323
fedele.pascuzzi@it.pwc.comPeter Yates
PricewaterhouseCoopers (Jersey)
44534 838 233
peter.yates@je.pwc.comGuenter Simon
PricewaterhouseCoopers (Luxembourg)
352 494 848 2375
guenter.simon@lu.pwc.comKenneth Macfarlane
PricewaterhouseCoopers
(Middle East - Oman)968 2455 9
3 kenneth.macfarlane@om.pwc.comManuel Luz
PricewaterhouseCoopers (Portugal)
352
3 599 2304
manuel.luz@pt.pwc.comAlex Bertolotti
PricewaterhouseCoopers (Russia)
7 495 232 5635
alex.bertolotti@ru.pwc.comIgnacio Medina
PricewaterhouseCoopers (Spain)
34 9568 4
83
ignacio.medina@es.pwc.com
Guido Andermatt
PricewaterhouseCoopers (Switzerland)
458 792 2540
guido.andermatt@ch.pwc.comJeroen De Jonge
PricewaterhouseCoopers
(The Netherlands) 320 568 6524
jeroen.de.jonge@nl.pwc.comMark Davis
PricewaterhouseCoopers (UK)
44 20 72
2 40 mark.w.davis@uk.pwc.comContacts
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separate and independent legal entity. Designed by studioec4 8722 (05/07). Why is tax important in a securitisation deal? • PricewaterhouseCoopers 6 www.pwc.com/securitisationquotesdbs_dbs21.pdfusesText_27[PDF] securitization pdf
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