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Wiley GAAP 2008 by Colorado Steven M. Bragg Englewood, Ralph Nach American Express Tax and Business Inc., Barry J. Epstein

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Definitions of Terms

The party on behalf of whom a state or local government agency raises funds by issuing bonds (commonly referred to as municipal bonds, industrial revenue bonds, or private activity bonds). Interest on the bonds typically is exempt from federal income tax to the investor and in order to qualify for this exemption, the proceeds from the bond must be used by the conduit bond obligor for purposes permitted under the federal income tax code. If the proceeds from the bonds are used to provide funding to multiple parties that participate in a pool (a pooled conduit debt security), all of the individual conduit bond obligors that participate are considered individually to be conduit bond obligors.

Certain limited‐obligation revenue bonds, certificates of participation, or similar debt instruments issued by a state or local governmental entity (issuer) for the purpose of providing financing for a specific third party (the conduit bond obligor) that is not a part of the issuer's reporting entity. Even though these securities bear the issuer's name, the issuer often has no obligation with respect to the debt other than as provided in a lease or loan agreement with the conduit bond obligor on whose behalf the securities are issued. The conduit bond obligor is responsible for making or funding all principal and interest payments when due and is also responsible for future financial reporting requirements with respect to the securities.

The asset recognized to reflect the ...

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