Background

Accountants have struggled for years over the accounting for SPEs and, in particular, the conditions under which a company should consolidate a SPE in which it does not hold a majority voting interest. The FASB added a project on the reporting entity, including consolidation and the equity method, to its agenda in January 1982. Accounting for SPEs is one of the more contentious issues in that project. Pending issuance of a FASB pronouncement, the SEC staff and the Emerging Issues Task Force issued interim guidance that directly or indirectly relates to VIEs, but most of that guidance refers to specific types of SPEs.

The December 2001 bankruptcy of Enron Corporation, which had engaged in numerous transactions with unconsolidated SPEs, added urgency to providing more comprehensive guidance. In July 2002, the FASB issued a proposed Interpretation, Consolidation of Certain Special Purpose Entities. They received over 140 comment letters and held two public roundtable meetings. FIN 46 is the result of the FASB’s redeliberations of the issues in light of the comments received.

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