1. Under the current accounting standards (FAS 166&167), do companies still have the opportunity to exercise discretions over the fair value estimation of retained interest in order to recognize a gain in a sale securitization transaction? Why or why not? 

2. Discuss the impact on the balance sheet, income statement, and statement of cash flow when a securitization is recorded as a sale vs. a secured borrowing (10pts). 

3. X transfers marketable equity security to Y with a date-of transfer price equal to $10. The transferred asset is isolated from X. For each of the following transfer provisions [considered independently], identify the affected condition for sale accounting and whether the provision prevents sale accounting for the transfer. 

a. X writes a put to Y, having an exercise price of $30 (Giving Y the right to sell at $30). The asset price is unlikely to rise to $30. 

b. Y may sell the asset to a third party one year or later after the transfer.

Answer rating: 100% (QA)

FAS 166167 states that i the securitization transaction results neither in transfer of ... View the full answer