Confabulated’s special purpose entity is most likely to be:

A. held off-balance-sheet.

B. consolidated on Confabulated’s financial statements.

C. consolidated on Confabulated’s financial statements only if it is a “qualifying SPE.”

Burton Howard, CFA, is an equity analyst with Maplewood Securities. Howard is preparing a research report on Confabulated Materials, SA, a publicly traded company based in France that complies with IFRS 9. As part of his analysis, Howard has assembled data gathered from the financial statement footnotes of Confabulated’s 2018 Annual Report and from discussions with company management. Howard is concerned about the effect of this information on Confabulated’s future earnings.
Information about Confabulated’s investment portfolio for the years ended 31 December 2017 and 2018 is presented in Exhibit 1. As part of his research, Howard is considering the possible effect on reported income of Confabulated’s accounting classification for fixed income investments.

In addition, Confabulated’s annual report discusses a transaction under which receivables were securitized through a special purpose entity (SPE) for Confabulated’s benefit.

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EXHIBIT 1: Confabulated's Investment Portfolio ( Thousands) Characteristic Bugle AG Cathay Corp Dumas SA Classification FVPL FVOCI Amortized cost Cost* 25,000 40,000 50,000 Market value, 31 December 2017 29,000 38,000 54,000 Market value, 31 December 2018 28,000 37,000 55,000