31 July 2009

European Securitisation Forum (ESF) Response to IASB Exposure Draft 3 on Derecognition - Proposed amendments to IAS 39 and IFRS 7

The ESF Accounting Committee responded to IASB Exposure Draft 3 on Derecognition, which proposed changes to IAS 39 and IFRS 7. The ESF response highlights the impact of the “Proposed Approach” (which permits derecognition of a transferred asset if the transferor has surrendered control of the entire asset or of a proportionate share of the cash flows from that asset) and the “Alternative View” (under which the transferor derecognises the asset and then recognises all rights and obligations retained/obtained in the transfer) on a typical securitisation transaction. The ESF considered that the outcome of the Alternative View would better represent, compared to the Proposed Approach, the residual economic position and post-transfer risk exposure for originators/sellers in securitisation transactions. However, the ESF pointed out that the Alternative View as currently drafted might potentially raise application issues and therefore recommended that, if the IASB decides to replace the derecognition requirements in the current IAS 39, it re-exposes for comment a further draft fully developing the Alternative View.

For any questions or comments relating to ESF respons, please contact Anna Zennaro at azennaro@sifma.org.