Thursday, 14 January 2010

Rule Makers Remove CMBS Market's Accounting Linchpin

By John Covaleski, Commercial Real Estate Direct Staff Writer

A new accounting rule that requires B-piece buyers of CMBS loans to record on their balance sheets the entire value of the bonds they handle has taken effect.

The Financial Accounting Standards Board, or FASB, has formally codified its FAS 167 standard, which eliminates qualifying special-purpose entities, or QSPEs, an accounting concept that's been the linchpin for CMBS.

The QSPEs allowed controlling-class investors to buy bonds from transactions without having to book the entire deals on their balance sheets. That in turn has enabled bond issuers to sell, for accounting purposes, the loans that they packaged into CMBS. They otherwise would have to carry the bonds' entire value on their books.

FAS 167, which also sets new reporting rules for the securitization of other types of...

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