What Was the Original Motivation by FASB on SPEs

question 55

Multiple Choice

What was the original motivation by FASB on SPEs?

• A) To establish a mechanism to encourage companies to invest in needed assets while keeping related debt of its books
• B) To keep the large amount of debt off the books
• C) To sell non-producing assets to the SPE
• D) To select which assets to sell to the SPEs affecting the gain

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Definitions:

Market Failure

A situation in which the allocation of goods and services by a free market is not efficient, often due to externalities, monopolies, or information asymmetries.

Efficient Outcome

An optimal allocation of resources where it is impossible to improve one party's position without worsening another's, often associated with maximized total welfare or utility in an economic context.

Total Surplus

The sum of consumer surplus and producer surplus in a market, representing the total net benefits to society from the trade.

Price Of Ethanol

The cost at which ethanol, a type of alcohol used as fuel, is sold in the market.