After a long process of consultation that began as far back as November 2004, when an Overview Paper was released, the Australian Prudential and Regulatory Authority released the final version of the Prudential Standards applicable to authorized deposit-taking institutions on 31 May 2006. The underlying intent of the revised prudential standards is to move away from the accounting standards in identifying capital instruments that can be considered as Tier 1 capital so that they do not affect the determination of prudential strength of deposit-taking institutions and separation of securitized assets. This article provides an in-depth analysis of the standards and focuses - at the same time - on banks and other financial institutions transferring assets to special purpose vehicles in the process of securitization, and on the interaction with IAS 39. In this connection, a comparative review of the position prevailing under FASB 140 in the United States is also presented in this article.