The reason is that existing consolidation guidance focuses primarily on parent-subsidiary relationships established through voting ownership interests, and the relationship between a business enterprise and an SPE is established through other means.The FASB believes that if a business enterprise has a controlling financial interest in an SPE, the assets, liabilities and results of the activities of the SPE should be included in consolidated financial statements with those of the business enterprise, which is referred to as the primary beneficiary of the SPE.Norwalk, CT, July 1, 2002—The Financial Accounting Standards Board (FASB) has approved for issuance an Exposure Draft of a proposed Interpretation that establishes accounting guidance for consolidation of special-purpose entities (SPEs).
They are an integral part of public private partnerships common throughout Europe which rely on a project finance type structure.
A special-purpose entity may be owned by one or more other entities and certain jurisdictions may require ownership by certain parties in specific percentages.
Under International Financial Reporting Standards (IFRS), the relevant standard is IAS 27 in connection with the interpretation of SIC12 (Consolidation—Special-Purpose Entities).
For periods beginning on or after 1 January 2013, IFRS 10 Consolidated Financial Statements supersedes IAS 27 and SIC 12.
One of the reasons for the collapse of the Enron SPE was that it became a vehicle for furthering the ends of the parent company in violation of the prudential norms of corporate financing and accounting.