Follow the directions - newswatch - Brief Article

Calendar-year companies have until New Year's Eve to comply with Fin 46 and put variable-interest entities (formerly special-purpose entities) on their balance sheets. The rule--a response to Enron's depredations--was supposed to take effect in the third quarter, but the original deadline was extended on October 8, after it became clear that some companies were still puzzled. The will-o'-the-wisps of the business world, VIEs are ethereal paper companies used to hold assets for such purposes as structured financing. But the same murky characteristics that made them useful for hiding Enron's debt also make them tricky to define, which forced the the Financial Accounting Standards Board to issue clarifications on Halloween.

"It's complicated to apply an economic concept to these structures," explains FASB chairman Robert Herz, "but we had to do it because trillions of dollars were being hidden off the books." Asked if recent restructuring by banks to keep VIEs off their books was in keeping with the underlying principle of Fin 46, Herz noted that banks "took further steps to deconsolidate the risk, so at least directionally, they went in the right direction." Tim Reason

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