The FASB is very close to finalizing new guidance that is expected to have a significant impact on VIE consolidation accounting. This new standard will require revisiting many, if not most, VIE determinations. It will change many existing VIE determinations.
The ASU is expected to be issued before the end of this year and to be effective in 2016 for public companies, with early adoption allowed.
This project has been in process for a long time, and the final stages are sneaking up on many of us. Because of the information that this redetermination will require, companies should:
- Get out in front of determining what information they will need,
- Proactively deal with the issues they may encounter in obtaining this information, and
- Develop the new processes and controls these changes will necessitate.
During the development of the ASU most of the focus has been on investment management companies. The new VIE approach will have a significant impact in this industry. However, it will also impact most limited partnerships and will have a variety of other impacts.
The most significant areas that will be affected include:
- Whether or not a limited partnership and similar entities are VIEs, and in particular the impact of kick-out rights,
- When a general partner should consolidate a limited partnership, and again the impact of kick-out rights,
- When and how variable interests held by the reporting entity’s related parties or de facto agents should affect consolidation conclusions,
- How a fee paid to a decision maker or service provider by a VIE should affect the consolidation determination, and
- When to require disclosures for a limited partnership that is a VIE but not consolidated by the reporting entity.
You can learn more about the project and its impact at:
As always, your thoughts and comments are welcome!