Amazingly, the rules developed by the accounting gurus stated that as long as 3 percent of the capital in the SPE came from an independent source and was truly at risk—meaning that it could all be lost if the deal went awry—the SPE qualified as independent. In other words, even if 97 percent of the capital consisted of debt raised by the company selling the assets, the company didn’t have to include that debt on its balance sheet. (Don’t search for the logic behind the 3 percent threshold. There isn’t any. For years, there were some, including a few high-ranking accountants at Arthur Andersen,
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