Rule on Off-Books Entities Is Delayed

Accounting regulators are giving companies more time to provide comprehensive financial reporting of certain off-balance-sheet entities, such as those once used by Enron Corp.

The Financial Accounting Standards Board said Wednesday that it decided to delay the implementation of a rule forcing companies to include on their books the assets and liabilities of many so-called special-purpose entities.

The FASB, which sets U.S. accounting rules, agreed that the standard would take effect with reports on the fourth quarter of this year rather than the third quarter.

The FASB has been under pressure from regulators and lawmakers to limit the use of special-purpose entities after the collapse of Enron, which allegedly used them to hide huge amounts of debt. But companies and accountants have said the new rule was complex and they needed more time to study it.

The rule requires a company that bears the majority of risks of an off-balance-sheet entity, and stands to reap the majority of the benefits, to consolidate the assets and the liabilities of the entity on its balance sheet.

Analysts at Credit Suisse First Boston estimated in June that full implementation of the rule could cause companies in the Standard & Poor’s 500 index to add almost $400 billion in assets to their balance sheets.

The delay applies to special-purpose entities created before Feb. 1, 2003. The rule already is effective for any such entities created after that date.

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Janus Posts Outflow in Wake of Trading Probe

Janus Capital Group Inc. said Wednesday that it saw a net outflow of assets in September, in a month when the firm was one of four mutual fund companies named in a court complaint alleging illegal or improper trading of fund shares.

Denver-based Janus said its assets under management as of Sept. 30 totaled $146.5 billion, down 3.6% from $152.0 billion at the end of August.

Janus said the decline stemmed from a net outflow of $3.4 billion in long-term (non-money market) assets; a $1-billion net outflow from institutional money market funds; and $1.1 billion in market depreciation.

Analysts have been watching to see whether investors would pull money out of fund companies named in the Sept. 3 court complaint filed by New York Atty. Gen. Eliot Spitzer.

The other three fund companies named were Bank of America Corp. (the Nations Funds); Bank One Corp. (One Group funds); and Strong Capital

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Management.

The complaint alleged that the fund companies gave a hedge fund, Canary Capital Partners, favored status in rapid trading of fund shares, at the potential expense of other investors.

None of the four mutual fund companies has been charged with wrongdoing, but Spitzer has said his investigation was ongoing, and has broadened it to include many other fund firms.

Janus said that as of Tuesday, its assets under management had climbed to $152.1 billion, mainly because of market appreciation.

Separately on Wednesday, people familiar with Spitzer’s case said that New York-based Fred Alger Management Inc., a money manager with about $10 billion of assets, was being investigated as part of the probe into fund trading.

Alger last week said it suspended three employees after the firm’s own probe into fund trades. Vice Chairman James Connelly was among those suspended, said an employee at the firm. Connelly couldn’t be reached for comment.

A spokeswoman for Alger said the company hadn’t been told it was a focus of state or federal investigations.

Alger has been trying to rebuild over the last two years after losing one-sixth of its staff in the attacks on the World Trade Center in September 2001.

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From Bloomberg News and Times staff reports