Scope

FIN 46 generally applies to business enterprises and arrangements used by business enterprises and applies to a larger population of entities than those commonly known as SPEs. VIEs covered by FIN 46 may include entities that are majority-owned subsidiaries. Accordingly, the parent or other parties who have relationships with the subsidiary must determine whether that subsidiary is a VIE. If so, the primary beneficiary, which might not be the majority owner, would consolidate the subsidiary. The scope of FIN 46, however, excludes certain entities that might otherwise meet the definition of a VIE. Most importantly, QSPEs as defined in Statement 140 and “grandfathered” QSPEs are excluded from the scope. Accordingly, transferors to QSPEs should not consolidate those entities. Additionally, other entities involved with QSPEs normally would not consolidate them either. Also excluded are certain not-for-profit organizations, employee benefit plans, subsidiaries of investment companies and separate accounts of life insurance entities, as well as virtual SPEs (divisions, departments, branches, and pools of assets subject to liabilities that are otherwise nonrecourse to the enterprise).

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