A special purpose vehicle (SPV) or special purpose entity (SPE) is a company that is created solely for a particular financial transaction or series of transactions. It may sometimes be something other than a company, such as a trust. The SPV’s debts may, or may not, be raised with recourse to the “real” borrower.
SPVs are used for other transactions including securitisations and the issue of catastrophe bonds. SPVs can also remove assets or liabilities from balance sheets, transfer risk and (in securitisations) allow the effective sale of future cash flows.
The effect of SPVs on accounts is obviously open to abuse. SPVs have often been used to manipulate published accounts, most notoriously by Enron. Accounting rules have since been tightened to make such abuses harder.
