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27-689: OzCar was a special purpose vehicle (or trust) established by the Australian government to provide financing for car loans after GE Money Motor Solutions and GMAC abandoned the Australian market during a financial crisis . Its establishment was announced in a media release on 5 December 2008 and it was legally established as a trust on 2 January 2009, although it was not activated until 1 September 2009. Its enabling legislation Car Dealership Financing Guarantee Appropriation Act 2009 received assent on 6 July 2009 and ceased on 4 April 2012 after repeal by

54-442: A member must depart from GAAP if following it would lead to a material misstatement on the financial statements, or otherwise be misleading. In the departure, the member must disclose, if practical, the reasons why compliance with the accounting principle would result in a misleading financial statement. Under Rule 203-1 – Departures from Established Accounting Principles , the departures are rare, and usually take place when there

81-456: A narrow set of goals without putting the entire firm at risk. SPEs are also commonly used in complex financings to separate different layers of equity infusion. Commonly created and registered in tax havens , SPEs allow tax avoidance strategies unavailable in the home district. Round-tripping is one such strategy. In addition, they are commonly used to own a single asset and associated permits and contract rights (such as an apartment building or

108-452: A power plant), to allow for easier transfer of that asset. They are an integral part of public private partnerships common throughout Europe which rely on a project finance type structure. A special-purpose entity may be owned by one or more other entities and certain jurisdictions may require ownership by certain parties in specific percentages. Often it is important that the SPE is not owned by

135-587: Is new legislation, the evolution of new forms of business transactions, an unusual degree of materiality, or the existence of conflicting industry practices. Accounting standards are currently set by the Financial Accounting Standards Board and were historically set by the American Institute of Certified Public Accountants (AICPA) subject to U.S. Securities and Exchange Commission (SEC) regulations. Auditors took

162-412: Is no connection with the sponsor. Some of the reasons for creating special-purpose entities are: Like a company, an SPE must have promoter(s) or sponsor(s). Usually, a sponsoring corporation hives off assets or activities from the rest of the company into an SPE. This isolation of assets is important for providing comfort to investors. The assets or activities are distanced from the parent company, hence

189-401: Is quite common for tanker fleets to have each tanker owned by a separate special-purpose entity to try to avoid group liability in relation to widely drawn anti-pollution laws. Generally Accepted Accounting Principles (United States) Generally Accepted Accounting Principles ( GAAP ) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC), and is

216-810: Is the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants . In addition to the SEC's rules and interpretive releases, the SEC staff issues Staff Accounting Bulletins that represent practices followed by the staff in administering SEC disclosure requirements, and it utilizes SEC Staff Announcements and Observer comments made at Emerging Issues Task Force meetings to publicly announce its views on certain accounting issues for SEC registrants. Examples of nonauthoritative accounting guidance and literature include

243-798: The Wheat Committee for its chairman Francis Wheat). This group determined that the APB must be dissolved and a new standard-setting structure created. In 1973, the APB was replaced by the Financial Accounting Standards Board (FASB) under the supervision of the Financial Accounting Foundation with the Financial Accounting Standards Advisory Council serving to advise and provide input on

270-515: The Enron scandal of 2001 . They were also used to hide losses and overstate earnings by executives at Towers Financial Corporation , which declared bankruptcy in 1994. Several executives of the company were found guilty of securities fraud, served prison sentences, and paid fines. Evergrande has also been accused of using off book SPE to hide debt. Under US GAAP , a number of accounting standards apply to SPEs, most notably FIN 46R that sets out

297-558: The Financial Framework Legislation Amendment Act (No. 1) 2012 . OzCar became involved in the OzCar affair in Australian politics. This Australian government-related article is a stub . You can help Misplaced Pages by expanding it . Special purpose vehicle Normally a company will transfer assets to the SPE for management or use the SPE to finance a large project thereby achieving

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324-523: The Codification. To prepare users for the change, the AICPA has provided a number of tools and training resources. While the Codification does not change GAAP, it introduces a new structure—one that is organized in an easily accessible, user-friendly online research system. The FASB expects that the new system will reduce the amount of time and effort required to research an accounting issue, mitigate

351-835: The FASB began working with the International Accounting Standards Board (IASB) to reduce or eliminate the differences between U.S. GAAP and the International Financial Reporting Standards (IFRS), known as the IASB-FASB convergence project. The scope of the overall IASB-FASB convergence project has evolved over time. The IASB and FASB issued converged standards for accounting topics including Business combinations (2008), Consolidation (2011), Fair value measurement (2011), and Revenue recognition (2014). Other convergence projects have been discontinued. As of 2022,

378-506: The Hierarchy of Generally Accepted Accounting Principles. All other accounting literature not included in the Codification is non-authoritative. The Codification reorganizes the thousands of U.S. GAAP pronouncements into roughly 90 accounting topics and displays all topics using a consistent structure. It also includes relevant Securities and Exchange Commission (SEC), guidance that follows the same topical structure in separate sections in

405-629: The accounting standards. After the creation of the FASB, the AICPA established the Accounting Standards Executive Committee (AcSEC). It publishes: In 1984, the FASB created the Emerging Issues Task Force (EITF). The mission of the EITF is to "assist the FASB in improving financial reporting through the timely identification, discussion, and resolution of financial accounting issues within

432-478: The consolidation treatment of these entities. There are a number of other standards that apply to different transactions with SPEs. Under International Financial Reporting Standards (IFRS), the relevant standard is IAS 27 in connection with the interpretation of SIC12 (Consolidation—Special-Purpose Entities). For periods beginning on or after 1 January 2013, IFRS 10 Consolidated Financial Statements supersedes IAS 27 and SIC 12. ^   a:  For example, it

459-540: The convergence project is coming to an end and no new projects will be added to the agenda. In 2008, the Securities and Exchange Commission issued a preliminary "roadmap" that indicated it was considering whether to adopt or allow domestic issuers to use IFRS instead of U.S. GAAP. In 2010, the SEC expressed their aim to fully adopt International Financial Reporting Standards in the U.S. by 2014. However, standards under IFRS differ considerably from U.S. GAAP, so progress

486-662: The default accounting standard used by companies based in the United States. The Financial Accounting Standards Board (FASB) publishes and maintains the Accounting Standards Codification (ASC), which is the single source of authoritative nongovernmental U.S. GAAP. The FASB published U.S. GAAP in Extensible Business Reporting Language (XBRL) beginning in 2008. The FASB Accounting Standards Codification

513-590: The entity on whose behalf the SPE is being set up (the sponsor). For example, in the context of a loan securitization , if the SPE securitization vehicle were owned or controlled by the bank whose loans were to be secured, the SPE would be consolidated with the rest of the bank's group for regulatory, accounting, and bankruptcy purposes, which would defeat the point of the securitization. Therefore, many SPEs are set up as 'orphan' companies with their shares settled on charitable trust and with professional directors provided by an administration company to ensure that there

540-601: The following: The FASB issues an Accounting Standards Update (Update or ASU) to communicate changes to the FASB Codification, including changes to non-authoritative SEC content. ASUs are not authoritative standards. Each ASU explains: To achieve basic objectives and implement fundamental qualities, GAAP has four basic assumptions, four basic principles, and five basic constraints. Under the AICPA 's Code of Professional Ethics under Rule 203 – Accounting Principles ,

567-684: The framework of the FASB Accounting Standards Codification." The FASB currently publishes the following: Circa 2008, the FASB issued the FASB Accounting Standards Codification, which reorganized the thousands of U.S. GAAP pronouncements into roughly 90 accounting topics. The Codification is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards documents are superseded as described in FASB Statement No. 168, The FASB Accounting Standards Codification and

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594-517: The leading role in developing GAAP for business enterprises. The United States Securities and Exchange Commission ( SEC ) was created as a result of the Great Depression . At that time there was no organization setting accounting standards. The SEC encouraged the establishment of private standard-setting bodies through the AICPA and later the FASB , believing that the private sector had

621-561: The much needed structured body of accounting principles. Thus, in 1959, the AICPA created the Accounting Principles Board (APB), whose mission it was to develop an overall conceptual framework. It issued 31 opinions until it was dissolved in 1973. Realizing the need to reform the APB, leaders in the accounting profession appointed a Study Group on the Establishment of Accounting Principles (commonly known as

648-477: The performance of the new entity will not be affected by the ups and downs of the originating entity. The SPE will be subject to fewer risks and thus provide greater comfort to the lenders. What is important here is the distance between the sponsoring company and the SPE. In the absence of adequate distance between the sponsor and the new entity, the latter will not be an SPE but only a subsidiary company . A good SPE should be able to stand on its feet, independent of

675-614: The proper knowledge, resources, and talents. Currently, the SEC works closely with various private organizations setting GAAP, but does not set GAAP itself. In 1939, urged by the SEC, the American Institute of Certified Public Accountants (AICPA) appointed the Committee on Accounting Procedure (CAP). During 1939 to 1959 CAP issued 51 Accounting Research Bulletins that dealt with a variety of timely accounting problems. However, this problem-by-problem approach failed to develop

702-643: The risk of noncompliance with standards through improved usability of the literature, provide accurate information with real-time updates as new standards are released, and assist the FASB with the research efforts required during the standard-setting process. Other organizations involved in determining United States accounting standards include: Other influential organizations include the Government Finance Officer's Association (GFOA), American Accounting Association, Institute of Management Accountants, and Financial Executives Institute. In 2006,

729-471: The sponsoring company. This does not always happen in practice. One of the reasons for the collapse of the Enron SPE was that it became a vehicle for furthering the ends of the parent company in violation of the prudential norms of corporate financing and accounting. Special-purpose entities were one of the main tools used by executives at Enron , in order to hide losses and fabricate earnings, resulting in

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