US regulators to rule on financial entities
US regulators are set to clamp down on special purpose entities, the financial vehicle that last year got in the news because they helped Enron hide its massive debts.
This week, the Financial Accounting Standards Board approved a new rule, which will be released today. The rule is designed to restrict the use of off-balance-sheet entities and force companies to consolidate them in their books.
Enron had set up hundreds of SPEs on the Cayman isles, and channelled loans from Citibank via the entities to present them as revenue to the energy company.
The new FASB rule will apply to new SPEs immediately, while existing entities need to be consolidated in company books by 1 July 2003.