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FASB proposes improvements to consolidation guidance

  • FASB document Image

Jun 23, 2017

The FASB has issued a proposed Accounting Standards Update (ASU), “Targeted Improvements to Related Party Guidance for Variable Interest Entities,” which is based on recommendations made by the Private Company Council.

The proposed ASU is “intended to reduce the cost and complexity of financial reporting associated with consolidation of variable interest entities.” Specifically, under the proposal:

  • Private companies “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.”
  • “Indirect interests held through related parties in common control arrangements would be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests.”
  • Consolidation would no longer be mandatory when “power is shared among related parties or when commonly controlled related parties, as a group, have the characteristics of a controlling financial interest but no reporting entity individually has a controlling financial interest.”

Comments on the proposed ASU are due by September 5, 2017. For more information, see the press release, FASB in Focus newsletter, and proposed ASU on the FASB’s Web site.

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