Variable interest entity may 08, 2017 / steven bragg a variable interest entity (vie) is a legal entity in which an investor holds a controlling interest, despite not having a majority of its share ownership. “ the variable interest entity required additional capital to operate until it reached it's breakeven point which was scheduled to occur next month ” was this helpful yes no 2 people found this helpful.
A variable interest entity is a method that can be used to own a particular business entitywith this type of entity, the amount of rights of the controlling owner of the business are limited compared to most other business structures. The variable interest entity consolidation guidance was issued to address entities for which the voting interest model in asc 810-102 is not appropriate this situation arises when a controlling financial interest is achieved through arrangements that do not involve voting interests. Consolidation and equity method of accounting once the pdf opens, click on the action button, which appears as a square icon with an upwards pointing arrow from within the action menu, select the copy to ibooks option.
A variable interest that a public company has in another entity may manifest itself outside of ownership or equity investment and could be a contractual or other monetary interest that changes with such entity’s fair value. 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. A variable interest entity is a method that can be used to own a particular business entity with this type of entity, the amount of rights of the controlling owner of the business are limited compared to most other business structures in order to qualify as a variable interest. Download the guide consolidation and equity method of accounting the inaugural edition of our accounting and financial reporting guide, consolidation and equity method of accounting , addresses the accounting for consolidation matters under us gaap reflecting the latest standards.
Fin 46(r), consolidation of variable interest entities—an interpretation of arb no 51, was issued in december 2003 in response to accounting scandals in which certain types of variable interest entities (vie) were used to structure transactions that excluded assets and liabilities from audited consolidated financial statements. Variable interest entities that effectively disperse risks will not be consolidated unless a single party holds an interest or combination of interests that effectively recombines risks that were previously dispersed an enterprise that consolidates a variable interest entity is the primary beneficiary of the variable interest entity.
Variable interest entity example an example of a variable interest entity would be if the jones corporation created a smaller company called the smith company the smith company needs to build a factory to manufacture its product. “ they were a variable interest entity and that meant a few things that i did not think about a lot and needed help discovering ” was this helpful yes no 10 people found this helpful.
An enterprise that holds significant variable interests in a variable interest entity but is not the primary beneficiary is required to disclose (1) the nature, purpose, size, and activities of the variable interest entity, (2) its exposure to loss as a result of the variable interest holder's involvement with the entity, and (3) the nature of its involvement with the entity and date when the involvement began.
A comprehensive guide to consolidation and equity method of accounting under us gaap pwc | cfodirect search search share variable interest entities (vies) voting interest entities (voes) consolidation and equity method. Variable interest entities (vies) are often established as special purpose vehicles (spvs) to passively hold financial assets, or to actively conduct research and development for example, a company may establish a vie to finance a project without putting the whole enterprise at risk.