In June, FASB changed the ground rules for securitization accounting when it adopted FAS 166 and 167. The “Q” (qualifying special purpose entity) is eliminated and, along with it, automatic off-balance sheet treatment for transfers of financial assets into securitization entities. Instead, securitizations must be evaluated for consolidation by internet holders with both:
a) The power to direct activities that most significantly impact the securitization’s economic performance, and
b) The obligation to absorb losses/receive benefits that could potentially be significant.