The Accounting for Financial Assets Securitization in Taiwan under IFRS
Date Issued
2012
Date
2012
Author(s)
Tai, Hsien-Cheng
Abstract
Ten years ago, securitization act for financial assets was enacted on 21st June, 2002,; furthermore, this debuted regulation set the cornerstone in forming the Taiwan securitization market and also broke through the existing circumstances into a new era. The adoption of IFRS at the beginning of the year 2013 fundamentally changed the accounting treatment of securitizations from the standards adopted hitherto Taiwan SFAS 33 frameworks. Originators were required to apply SIC 12 and IFRS 9 rules that, respectively, dictates whether Special Purposes Vehicles should be consolidated and to what extent securitized assets can be subsequently de-recognised.
Key concepts that underline the new accounting principles are risk/reward retention, then asset control and criteria of pass through. Though certain aspects of the IFRS are still subject to interpretation or clarification, it is likely that most Taiwan structured financings in their current form will be required to consolidate and/or recognize securitized assets, certainly if the new rules are to be enforced. While people in this industry concerns that market volumes will be negatively impacted by the new challenges in getting off-balance sheet treatment for securitized assets, we believe the reality is that most issuers will continue to look to securitizations for cost competitive funding. Moreover, securitizations may be able to structure around the new rules, should borrowers wish to limit balance sheet usage.
Subjects
Securitization
Financial Assets
IFRS
SPV
De-recognition
Type
thesis
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