FASB Increases Disclosure Requirements

The Financial Accounting Standards Board has issued new standards that increase the disclosure requirements that public companies need to make about their financial asset transfers and variable-interest entities.

FASB Staff Position FAS 140-4 and FIN 46(R)-8, "Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities," goes into effect for reporting periods, both interim and annual, that end after Dec. 15, 2008. The purpose of the new standards is to quickly improve disclosures by public entities and enterprises until pending amendments to two other FASB standards are finalized and approved by the board.

The FSP amends Statement 140 to require public entities to provide additional disclosures about transferors' continuing involvements with transferred financial assets. It also amends Interpretation 46(R) to require public enterprises, including sponsors that have a variable interest in a variable-interest entity, to provide additional disclosures about their involvement with variable-interest entities.

The FSP also requires disclosures by a public enterprise that is a sponsor of a qualifying special-purpose entity that holds a variable interest in the qualifying SPE but was not the transferor of financial assets to the qualifying SPE, and a servicer of a qualifying SPE that holds a significant variable interest in the qualifying SPE but was not the transferor of financial assets to the qualifying SPE.