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Journal entry — Consolidation — FASB discusses money market funds and decision-maker fees

Published on: Apr 16, 2014

At its meeting today, the FASB discussed (1) its proposed consolidation scope exception for money market funds and (2) the circumstances in which a fee arrangement represents a variable interest. The FASB reached the following tentative decisions:

  • The final standard will include a scope exception for entities that are “similar” to a fund regulated under Rule 2a-7 of the Investment Company Act of 1940. The FASB agreed to provide interpretive guidance to help entities make this determination.
  • Sponsors of funds that qualify for the money-market-fund scope exception will be required to disclose whether they have (1) provided support to the fund (e.g., capital contributions, fee waivers) in any of the periods for which a statement of operations is presented and (2) explicitly committed to providing such support.
  • Fees paid to a decision maker will not be considered a variable interest if all of the following conditions are satisfied:1
    • “The fees are commensurate with the services provided.”
    • “The decision maker or service provider does not hold other interests in the VIE that individually, or in the aggregate, would absorb more than an insignificant amount of the VIE’s expected losses or receive more than an insignificant amount of the VIE’s expected residual returns.”
    • “The compensation arrangement includes only terms, conditions, or amounts that are customarily present in arrangements for similar services negotiated at arm’s length.”


1 Quoted material is from the meeting handout.

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