FASB issues proposal for consolidation of VIEs

By Jeff Drew

FASB on Thursday proposed an Accounting Standards Update (ASU) designed to simplify and improve financial reporting associated with consolidation of variable-interest entities (VIEs).

Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities would address private company concerns regarding the difficulty of navigating and applying current VIE guidance to common-control arrangements. The proposed ASU, which seeks to reduce cost and complexity, is based on recommendations from the Private Company Council.

Under the proposed update, a private company (reporting entity) would not have to apply VIE guidance to legal entities under common control, including common-control leasing arrangements, if both the parent and the legal entity being evaluated for consolidation are not public business entities.

The accounting alternative would be an accounting policy election that a private company would apply to all current and future legal entities under common control that meet the criteria for applying this alternative, which could not be applied to select common-control arrangements. A private company electing to use the alternative still would be required to follow other consolidation guidance, particularly the voting interest entity guidance, unless another scope exception applies.

The proposed update also would require a private company to provide detailed disclosures about its involvement with and exposure to the legal entity under common control. In addition, the proposed ASU would amend certain VIE guidance for related-party arrangements. More information on these amendments can be found in the FASB in Focus document.

The full exposure draft is available on the FASB website. Comments on the exposure draft are due by Sept. 5, 2017.

Jeff Drew (Jeff.Drew@aicpa-cima.com) is a JofA senior editor.

Where to find October’s flipbook issue

The Journal of Accountancy is now completely digital. 

 

 

 

SPONSORED REPORT

2022 Payroll Update

Employees working remotely have created numerous issues for employers. The 2022 Payroll Update report provides insight on remote workforce tax issues, pandemic payroll issues and employer credits, and worker classification issues in the gig economy.