On True Sale Issues in Financial Asset Securitization－Including Related Consolidation Considerations

Abstract
With increasing amount of asset backed securities issued in Taiwan and US, related issues of financial asset securitization draw more attention than before. Asset derecognition concern is one of the most important factors to drive entities to launch securitization because of its advantages: reducing capital requirement, improving capital structure, increasing operational performance and liquidating assets. However, complex arrangements and application of derivatives in securitization make the nature of transfer obscure and lead to originator’s difficulty in determining whether its securitization qualifies for derecognition. We can recognize derecognition as complicated issue from frequently revised accounting standards. In this paper, I expect to visit the revolving derecognition concepts and apply them to Taiwan GAAP. Try to build a complete framework for practice by making comments on concepts and Taiwan’s practice.
This paper consists of six parts, they are:
1. Motive, purpose, skeleton, and methods of this paper.
2. The primary content of this part is to visit revolving true sale concepts including legal form, risk and reward, effective control, continuing involvement, components approach and hybrid approach by analyzing International Accounting Standards and Financial Accounting Standards and build a complete framework for true sale concepts.
3. The primary content of this part is to visit revolving consolidation concepts and SPE by analyzing International Accounting Standards and Financial Accounting Standards and build a complete framework for consolidation concepts.
4. The primary content of this part is to introduce newly issued Taiwan GAAP No.33「Accounting for Transfers of Financial Assets and Extinguishments of Liabilities」which involved in true sale and consolidation issues of securitization, and point out the background information of GAAP No.33.
5. Make comments on different theories and current Taiwan accounting standards and compare the difference of various concepts.
6. Conclusion and suggestion