Consolidation of Variable Interest Entities
This flowchart illustrates the decision process in Interpretation 46 regarding (1) whether an entity is a VIE, (2) whether to consolidate a VIE or a silo; and (3) if consolidation is required, how to measure the assets and liabilities of the VIE. Every holder of significant interests in a VIE needs to go through a similar decision process. This flowchart is prepared from the perspective of one interest holder, called the enterprise or evaluating enterprise. The flowchart uses the following terms with the following meanings:
- Entity refers to the arrangement being evaluated to determine whether it is a VIE and whether the evaluating enterprise
should consolidate it;
- Party or parties refers to all holders of significant interests in the potential VIE; and
- Other party or other parties refers to holders other than the evaluating enterprise.
The paragraph references identify the paragraphs of Interpretation 46 relevant to each decision.