1)Accounting for Securitization under SFAS No. 140 (2000) is a limited attempt to describe complex transactions that are structured to yield desired economic and accounting outcomes. This accounting raises three issues for users of financial reports. Stat

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1)Accounting for Securitization under SFAS No. 140 (2000) is a limited attempt to describe complex transactions that are structured to yield desired economic and accounting outcomes. This accounting raises three issues for users of financial reports. State these three issues.
(1.5 Marks)
2)The vast majority of SPEs are VIEs, however VIEs need not be SPEs. Explain this statement. Also state the conditions that define an entity as VIE. (0.5 + 1.5 Marks)
3)The sensitivity approach requires that the firm provide an estimate of the loss of value, earnings, or cash flow caused by a specific adverse movement in each market price or rate. Sensitivity Approach also has some strength and some weakness. Discuss the strength and weakness of Sensitivity Approach. (1.5 Marks)

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