One of the reasons why companies use trusts is to place selected assets or liabilities off balance sheets. However, careful planning is required to achieve this goal. This article examines the treatment of securitisations and employee benefit trusts.
Securitisations
There is a continuing debate as to whether a charitable trust can be used to achieve an effective independent entity or whether it is better to use one of the burgeoning purpose trust regimes that are now on offer. Of even more importance is what the correct accounting treatment for such transactions should be.
The process of a securitisation is relatively straightforward. It involves the establishment of a special purpose vehicle under a trust. The special purpose vehicle (the issuer) will issue loan notes backed by certain receivables or possibly other assets sold to it by the original lender (the originator).
