FASB proposes amending consolidation guidance

By Ken Tysiac

FASB issued a proposal Thursday that would amend consolidation guidance in an effort to provide more useful information to investors.

Current GAAP requires a single decision-maker, in circumstances involving common control, to attribute interests held by certain of its related parties to itself. This may require the single decision-maker to consolidate a variable-interest entity (VIE) even if it has little or no direct economic interests in the VIE.

Under the proposal issued Thursday, a single decision-maker would focus on the economics to which it is exposed when determining whether it is the primary beneficiary of a VIE before potentially evaluating which party is most closely associated with the VIE.

Comments on the proposal can be made through July 25 at FASB’s website.

Ken Tysiac (ktysiac@aicpa.org) is a JofA editorial director.

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