Initial Measurement

At the time of initial consolidation, a primary beneficiary generally records the assets, liabilities, and noncontrolling interests of the VIE at their fair values, with the following exceptions: (1) if the primary beneficiary and the VIE are under common control, the primary beneficiary records the VIE’s assets and liabilities at their carrying amounts; or (2) if the primary beneficiary transfers assets and liabilities to the VIE, the assets and liabilities are measured as if they had not been transferred.

If the fair value of the newly consolidated assets and the reported amount of assets transferred by the primary beneficiary of the VIE exceeds the sum of the consideration paid, the reported amount of any previously held interests, and the fair value of the newly consolidated liabilities and noncontrolling interests, the primary beneficiary should record the excess similar to negative goodwill in a purchase business combination (i.e., by allocating the excess pro rata to reduce the carrying amounts of the VIE’s net assets). If the sum of the consideration paid, the reported amount of any previously held interests, and the fair value of the newly consolidated liabilities and noncontrolling interests exceeds the sum of the fair value of the assets of the VIE and the reported amount of the assets transferred, the primary beneficiary should report the excess as an extraordinary loss in the period in which the enterprise becomes the primary beneficiary. Primary beneficiaries may not record goodwill in VIEs.

After the initial measurement, the assets, liabilities, and noncontrolling interests of a consolidated VIE should be accounted for in consolidated financial statements as if the entity were consolidated based on voting rights.

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