Accounting rules which allowed risky structures to be kept off the balance sheet are to be revised, with the structures no longer being allowed
The move is one of several plans to revise the rules announced by standard setters in response to the global credit crunch.
The rules on off balance sheet structures allowed lenders to keep risky assets off their books, but were forced to bring them on to the books when their valuations dropped in a spiralling market, causing billions in writedowns.
Financial Accounting Standards Board chairman Robert Herz said the group had been tasked by the US President’s Working Group to fix the problematic rules by the end of the year.
The FASB has resolved to ‘kill’ qualified special purpose entities (QSPEs) which allowed lenders to take assets off their balance sheets.
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