Accounting consolidating statements
The primary beneficiary is the reporting entity, if any, that receives the majority of expected returns or absorbs the majority of expected losses.CPAs SHOULD RECONSIDER A DECISION ABOUT WHETHER an entity is a VIE if its situation changes so its equity investment at risk is no longer adequate, some or all of the equity investment is returned to investors or the entity undertakes additional activities, acquires additional assets or receives an additional equity investment that is at risk. 46(R) is causing reporting entities to make new decisions about whether affiliated entities need to be consolidated into their financial statements.
In response to concern about this practice, FASB issued Interpretation no.
Public companies were required to implement the consolidation provisions in Interpretation no. Private companies with an interest in a VIE that was created after December 31, 2003, should have consolidated those entities immediately.
Most private companies with VIEs that existed on December 31, 2003, made transition disclosures during calendar year 2004 and were required to consolidate those VIEs no later than calendar year 2005. 46(R) a VIE must be consolidated into the financial statements of the primary beneficiary company when either of the following conditions exist: The VIE does not have sufficient equity investment at risk.
46 in January 2003 and a revised version in December 2003 to help companies decide whether to consolidate VIEs into their financial statements.
A VIE MUST BE CONSOLIDATED INTO THE FINANCIAL statements of the primary beneficiary company when it does not have enough equity at risk or its equity investors lack any of three characteristics of controlling financial interest.