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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