Course Description

Understanding the New Consolidation of Variable Interest Entity Rules

Accounting & Auditing

(12 credits) $156.95

Important:  Until further notice, this course does not qualify for NASBA/QAS credit.  Please contact your state board to determine if this course will qualify for CPE in your state.

The purpose of this course is to review the complex new consolidation rules for off-balance sheet entities. Topics include determining whether an entity is a variable interest entity (VIE), types of variable interests, identifying the primary beneficiary that consolidates the VIE, consolidation of real estate entities, implementing the new rules, financial statement display of the consolidated entity, and more.

Major Subjects:

	The Old Rules for Consolidations and SPEs
	Overview of GAAP Rules for Investments and Consolidations
	Consolidations and Combined Statements
	Exceptions to the More Than 50% Ownership Test- Consolidation
	Exception 1: Physician Practice Management Entities- EITF Issue No. 97-2
	Exception 2: Real Estate Entities- SOP 78-9
	Exception 3: The New Variable Interest Entity Rules- Interpretation No. 46R
	FASB Interpretation No. 46: Consolidation of Variable Interest Entities
	Background on Interpretation No. 46R
	What is a VIE?
	General Rules of Interpretation No. 46R
	Application of the Interpretation
	Special Exemptions from Interpretation No. 46R
	SECTION 2
	Rules of the Interpretation
	Basic Rules for Consolidation- 3 Requirements
	Requirement 1 for Consolidation: There Must Be a Variable Interest Entity (VIE)
	Definition of a VIE
	Condition 1: The Total Equity Investment at Risk is Not Sufficient
	10 Percent Presumption Rule
	Qualitative Methods for Determining the Sufficiency of Equity
	Quantitative Method 1- Expected Losses Method
	Reconsideration of VIE Status
	Development Stage Enterprise- VIE Test
	Condition 2: VIE Based on Equity Holders Lacking Risks and Rights of Ownership
	SECTION 3
	Requirement 2 for Consolidation: An Entity Must Have a Variable Interest in the VIE
	Definition of a Variable Interest
	Typical Degree of Variability- Variable Interests
	Variable Interests in Specified Assets of an Entity
	SECTION 4
	Requirement 3 for Consolidation: Determining the Primary Beneficiary of the VIE
	Definition of a Primary Beneficiary
	Determining Who is the Primary Beneficiary
	Determining the Primary Beneficiary- Facts and Circumstances Method
	Determining the Primary Beneficiary- Detailed Quantitative Method
	Related-Party Rules- Primary Beneficiaries
	SECTION 5
	Initial Test and Measurement of the VIE By the Primary Beneficiary
	Updating the Primary Beneficiary Test
	Logistical Issues of Consolidation
	Disclosures Under the Interpretation
	Effective Date and Transition Requirements of Interpretation No. 46R
	Subsidiary (VIE) Only Financial Statements
	Avoiding the Consolidation Rules Under Interpretation No. 46R