CCH Learning Center

Description:
The general rule for consolidation of entities found in ARB No. 51, Consolidated Financial Statements (ASC Topic 810) is that consolidation occurs when one entity directly or indirectly has a controlling financial interest in another entity. A controlling financial interest is deemed to occur when one entity (the parent) owns more than 50 percent of the voting shares of another entity (the subsidiary.) Prior to FIN 46R, with respect to an enterprise that controlled, but did not own another entity, the rules had been scattered among a series of FASB Emerging Issues Task Force opinions.

In most cases, an enterprise that controlled another (through contract, support, or otherwise), but did not own the majority of its voting equity, was not required to consolidate with that entity provided certain criteria were met. Thus, the concept of "off-balance sheet" entities (that is, unconsolidated entities), has evolved over the years.

FIN 46R, as amended, addresses those so called "off-balance sheet" entities (referred to as variable interest entities or VIEs) and establishes rules as to when one entity must consolidate another entity that it effectively controls, even though there may be no controlling ownership between the two entities. This course discusses what characterizes a VIE, the tests that should be performed to determine whether an entity is a VIE, and other requirements related to VIEs.

Upon completion of this course, the professional will be able to do the following:

• Define a VIE
• Describe what characterizes a VIE
• Explain the tests, both qualitative and quantitative, that are used to determine whether an entity is a VIE and who should perform those tests
• List the requirements under FIN 46R (now codified as part of FASB ASC Topic 810) that must be satisfied in order for one entity to consolidate an off-balance sheet entity
• State when a VIE should be recharacterized and at what value
• List examples of variable interests