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WILMINGTON, Del., July 30 (Reuters) - The Financial Accounting Standards Board, which sets U.S. accounting rules, voted on Wednesday to delay accounting changes that would affect trillions of dollars in off-balance sheet assets at banks and financial companies.
Reversing an earlier decision to make some parts of the rule change effective at the end of this year, FASB members voted that the rule should take effect all at once, for reporting periods after Nov. 15, 2009.
FASB voted in April to revamp two accounting standards known as FAS 140 and FIN 46R, to eliminate a concept known as the “qualifying special-purpose entity,” or QSPE, that banks use to keep assets like mortgage-backed securities and special investment vehicles off their balance sheets.
At their meeting on Wednesday, FASB members said the delay was necessary because a formal proposal has not yet been issued. Proposals are subject to public comment periods and revisions, leaving little time for companies to adopt the rule if parts of it were to take effect for reporting periods after the end of this year, the board members said.
“It’s just not practical that we would be able to issue the final standard in time,” FASB member Thomas Linsmeier said.
The delay means that most U.S. companies would not have to adopt the changes until they issue financial reports for fiscal 2010.
Several FASB members, however, said they were delaying the rule’s effective date “reluctantly,” because investors would benefit from clearer information about the risks banks face from off-balance sheet assets now.
The current standard “was stretched beyond recognition,” FASB Chairman Robert Herz said at the meeting.
Over the past month, FASB has received requests from lawmakers and industry groups to slow down the rule, as concerns about the effect of the accounting changes on capital requirements at financial institutions were partially blamed for the recent fall in shares of mortgage lenders Fannie Mae FNM.N and Freddie Mac FRE.N.
Before its vote, the FASB staff recommended that the board delay the rule, saying that a hastily issued rule this year may not give regulators enough time to evaluate its effect on capital requirements and that some investors had requested a single effective date. (Reporting by Emily Chasan, editing by Gerald E. McCormick, Dave Zimmerman)
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