
#REDIRECT Special purpose entity
A special purpose entity (SPE) (formerly "special purpose vehicle") is a firm created by a company to fulfill narrow or temporary objectives. For example if a company wished to overthrow a leader in a country, they may form an entity to execute the coup d'état; once the objective has been achieved, the special purpose entity would be seized and operated by the company. A special purpose entity is typically almost entirely owned by the parent company, but it is required that at least 3% be owned by another investor. ==Uses== Some of the reasons for creating special purpose entities are: * They allow companies to avoid commoditizing investments that don't look attractive to investors. This is only possible if the parent company has less than 97% of the initial investment. For example, Electronic Data Systems has been having a lot of problems with the U.S. Securities and Exchange Commission (SEC) because of its omission of $500 million of computer equipment from its financial statement that it would be liable for should its customers bail out of the contract. * They avoid involving the parent company in very risky projects. This reason is weak though, as most special purpose entities have triggers that commit the parent company to some obligations—these triggers are usually meant to attract other investors to share the risks. * They allow a company to operate in a barely legal manner. For example, companies sometimes use special entities to employ workers without paying them benefits. This is the bone of relationship between Walmart and Orientex Inc, an apparel company whose sole client is Walmart. * For competitive reasons. For example, when Intel and Hewlett-Packard started developing Itanium processor, they created a special purpose entity which owned the intellectual technology behind the processor. This was done to prevent competitors like AMD accessing the technology through pre-existing licensing deals. * To avoid tax ===Users=== *Citigroup *Enron is an example of a company that made extensive use of special purpose entities. ==Qualified special purpose entity== The Financial Accounting Standards Board has issued its exposure draft, Qualifying Special-Purpose Entities and Isolation of Transferred Assets, an amendment of FAS 140. ==See also== *FIN 46 (FASB ruling on consolidation of variable interest entities) *Off-Balance-Sheet Entities *Variable Interest Entity (VIE) ==External links== * [http://www.pwcglobal.com/Extweb/service.nsf/0/FCD40BE17A981E1180256C78003FE8A0?opendocument A description of SPEs from PricewaterhouseCoopers] * [http://www.bankruptcylawfirms.com/Bankruptcy-Entity.cfm An explanation from BankruptcyLawFirms.com] *Articles **[http://www.cfo.com/article.cfm/3010699 Citi's New Stance - CFO Magazine - November Issue 2003 - CFO.com] Corporate finance
This is a paragraph in "The Roaring nineties" by Joseph Stiglitz page 129 ...The ethos at the time was to avoid as many taxes as possible, and the Reagan administration helpfully provided business (and affluent citizens) with host of new tax-dodging techniques. A firm was entitled to an investment tax credit, for example, when it bought a machine. But if the firm had no income to begin with, the credit had little value. To get around this difficulty, companies resulted to complex lease deals. Instead of buying a machine with borrowed money from say GE credit, a company would have GE credit buy it and rent it back to the company. The payment was the same.... Boy, i don'y feel like typing the whole section, so i will dive to the relevant section ..In the succeeding years, even more complicated devices were invented, partly to take advantage of different tax laws in different countries. It become common for numerous parties to figure in a single transaction-the kind of equipment purchase that in the past, would have entailed only one buyer and a seller or at most a buyer, a seller and a bank, which rent money. An American firm might sublease a piece of computer equipment to a foreign firm, created for that express purpose, and the foreigh firm might go to sublease it to another American firm (Also created for that purpose), who would make a single up-front payment to the foreign firm, but borrow the money from one branch of the bank and (to make sure the foreign firm didn't run off with the money) immediately deposit it into another branch of the same bank. The foreign firm might then contribute the capital - which consist of nothing more than the bank account and its pledge to pay the lease payments its obligated - to a partnership. A year later (Seemingly by agreement), the partner would buy out the new "partner," recording loss on its books on the deal. Other firms might be brought into the tax scam. This whirl of mini-transactions was meant to make the mind spin-to obscure the fact that nothing real was going on, and, to rob the US treasury. I typed the second paragraph for two reasons: * To support an edit i intend to include in the special purpose entity article. * Seek assistance - I am sincerely lost. Would someone reward the paragraph and potentially include some text graphic of what Stiglitz described above please ? ==NPOV== This article would benefit from clean-up. First off, the coup d'etat example in the lead paragraph is quite sensational and sets the tone that SPEs are used primarily to circumvent laws and control environments. And as we all know, the SPE would not protect the owners from prosecution for committing the crime described. The abuses (like Enron's) should be discussed in more detail, but so should the Itanium project and like SPEs.User:Bollar 12:20, Jun 23, 2005 (UTC)
See other meanings of words starting from letter:
Words begining with Special_purpose_entity:
Special_Purpose_Entity
Special_purpose_entity
Special_purpose_entity
Special Purpose Entity
#REDIRECT Special purpose entity
Special purpose entity
A special purpose entity (SPE) (formerly "special purpose vehicle") is a firm created by a company to fulfill narrow or temporary objectives. For example if a company wished to overthrow a leader in a country, they may form an entity to execute the coup d'état; once the objective has been achieved, the special purpose entity would be seized and operated by the company. A special purpose entity is typically almost entirely owned by the parent company, but it is required that at least 3% be owned by another investor. ==Uses== Some of the reasons for creating special purpose entities are: * They allow companies to avoid commoditizing investments that don't look attractive to investors. This is only possible if the parent company has less than 97% of the initial investment. For example, Electronic Data Systems has been having a lot of problems with the U.S. Securities and Exchange Commission (SEC) because of its omission of $500 million of computer equipment from its financial statement that it would be liable for should its customers bail out of the contract. * They avoid involving the parent company in very risky projects. This reason is weak though, as most special purpose entities have triggers that commit the parent company to some obligations—these triggers are usually meant to attract other investors to share the risks. * They allow a company to operate in a barely legal manner. For example, companies sometimes use special entities to employ workers without paying them benefits. This is the bone of relationship between Walmart and Orientex Inc, an apparel company whose sole client is Walmart. * For competitive reasons. For example, when Intel and Hewlett-Packard started developing Itanium processor, they created a special purpose entity which owned the intellectual technology behind the processor. This was done to prevent competitors like AMD accessing the technology through pre-existing licensing deals. * To avoid tax ===Users=== *Citigroup *Enron is an example of a company that made extensive use of special purpose entities. ==Qualified special purpose entity== The Financial Accounting Standards Board has issued its exposure draft, Qualifying Special-Purpose Entities and Isolation of Transferred Assets, an amendment of FAS 140. ==See also== *FIN 46 (FASB ruling on consolidation of variable interest entities) *Off-Balance-Sheet Entities *Variable Interest Entity (VIE) ==External links== * [http://www.pwcglobal.com/Extweb/service.nsf/0/FCD40BE17A981E1180256C78003FE8A0?opendocument A description of SPEs from PricewaterhouseCoopers] * [http://www.bankruptcylawfirms.com/Bankruptcy-Entity.cfm An explanation from BankruptcyLawFirms.com] *Articles **[http://www.cfo.com/article.cfm/3010699 Citi's New Stance - CFO Magazine - November Issue 2003 - CFO.com] Corporate finance
Special purpose entity
This is a paragraph in "The Roaring nineties" by Joseph Stiglitz page 129 ...The ethos at the time was to avoid as many taxes as possible, and the Reagan administration helpfully provided business (and affluent citizens) with host of new tax-dodging techniques. A firm was entitled to an investment tax credit, for example, when it bought a machine. But if the firm had no income to begin with, the credit had little value. To get around this difficulty, companies resulted to complex lease deals. Instead of buying a machine with borrowed money from say GE credit, a company would have GE credit buy it and rent it back to the company. The payment was the same.... Boy, i don'y feel like typing the whole section, so i will dive to the relevant section ..In the succeeding years, even more complicated devices were invented, partly to take advantage of different tax laws in different countries. It become common for numerous parties to figure in a single transaction-the kind of equipment purchase that in the past, would have entailed only one buyer and a seller or at most a buyer, a seller and a bank, which rent money. An American firm might sublease a piece of computer equipment to a foreign firm, created for that express purpose, and the foreigh firm might go to sublease it to another American firm (Also created for that purpose), who would make a single up-front payment to the foreign firm, but borrow the money from one branch of the bank and (to make sure the foreign firm didn't run off with the money) immediately deposit it into another branch of the same bank. The foreign firm might then contribute the capital - which consist of nothing more than the bank account and its pledge to pay the lease payments its obligated - to a partnership. A year later (Seemingly by agreement), the partner would buy out the new "partner," recording loss on its books on the deal. Other firms might be brought into the tax scam. This whirl of mini-transactions was meant to make the mind spin-to obscure the fact that nothing real was going on, and, to rob the US treasury. I typed the second paragraph for two reasons: * To support an edit i intend to include in the special purpose entity article. * Seek assistance - I am sincerely lost. Would someone reward the paragraph and potentially include some text graphic of what Stiglitz described above please ? ==NPOV== This article would benefit from clean-up. First off, the coup d'etat example in the lead paragraph is quite sensational and sets the tone that SPEs are used primarily to circumvent laws and control environments. And as we all know, the SPE would not protect the owners from prosecution for committing the crime described. The abuses (like Enron's) should be discussed in more detail, but so should the Itanium project and like SPEs.User:Bollar 12:20, Jun 23, 2005 (UTC)
See other meanings of words starting from letter:
S
SB | SC | SD | SE | SF | SG | SH | SI | SJ | SK | SL | SM | SN | SO | SP | SR | SS | ST | SU | SW | SX | SY | SZ |Words begining with Special_purpose_entity:
Special_Purpose_Entity
Special_purpose_entity
Special_purpose_entity
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