Variable interest entity
Variable interest entity (VIE) is a term used by the United States Financial Accounting Standards Board (FASB) in FIN 46 to refer to an entity (the investee) in which the investor holds a controlling interest that is not based on the majority of voting rights. It is closely related to the concept of a special purpose entity. The importance of identifying a VIE is that a company needs to consolidate such entities if it is the primary beneficiary of the VIE.
Note: The guidance in FIN 46 and FIN 46R was subsequently revised when FASB issued Statement 167.[1]
Criteria
A VIE is an entity meeting one of the following three criteria as elaborated in FASB ASC 810-10 [formerly FIN 46 (Revised)]:
- The equity-at-risk is not sufficient to support the entity's activities (e.g.: the entity is thinly capitalized, the group of equity holders possess no substantive voting rights, etc.)
- As a group, the equity-at-risk holders cannot control the entity
- The economics do not coincide with the voting interests (commonly known as the "anti-abuse rule")
References
- ↑ "FASB issues Statement 167, amendments to FIN 46(R)" (PDF). Ernst & Young. No. 2009-22. 12 June 2009.
- http://www.vinodkothari.com/fin46vk.htm
- http://www.bloomberg.com/apps/news?pid=20601103&sid=aFTh5VXP9m0U&refer=news
- http://www.ft.com/cms/s/0/b7e7876a-e564-11dc-9334-0000779fd2ac.html
- http://www.nysscpa.org/cpajournal/2006/806/essentials/p28.htm
This article is issued from Wikipedia - version of the Friday, September 26, 2014. The text is available under the Creative Commons Attribution/Share Alike but additional terms may apply for the media files.