Research Paper on:
Appropariate Guidance and Standards for the Consolidation of Special Purpose Entities and FASB

Unformatted Sample Text from the Research Paper:
special-purpose entities (SPE) may result in implementation of procedures that, hopefully, will clarify rules and applications. The reason such an issue is of particular concern at this point in time  is the fact that the inappropriate accounting practices at Enron included the use of SPEs and the ways in which the venerable Arthur Anderson accounting firm chose to look away  from how SPEs were being used there. Information released to both the private and public sector indicates, as is noted in the Health Care Financial Management (09-02) bulletin that the  exposure draft: "applies to business enterprises--both public and private -- that have an ownership interest, contractual relationship, or other business relationship with an SPE. The FASB says it  does not seek to restrict the use of SPEs but to improve financial reporting by enterprises involved with SPEs" (pp. 11). The Board also makes note of the fact  that it does not want to suggest that SPEs do not have a legitimate purpose. Therefore, the discussion is not one such as that which erupted or derivatives and the  use of derivatives in investment accounting several years ago. Again, referencing the information in the Health Care Financial Management bulletin, the FASB does believe that: "most SPEs serve valid  business purposes, such as isolating assets or activities to protect the interests of creditors or other investors, or to allocate risks among participants" (pp. 11). Defining a Special-Purpose Entity A  special-purpose entity is, according to Cheney (2002) who quotes Ron Lott of the FASB as being "designed so that a de facto controlling organization may have no voting power while  the people who do vote have little financial risk in the entity" (pp. 5). Kahn (2002) adds that SPEs are what the media calls "off-balance-sheet partnerships -- those hundreds of