Consolidation — FASB further deliberates principal-versus-agent guidance

Published on: 08 Jan 2014

At its meeting today, the FASB continued deliberating its principal-versus-agent guidance related to consolidating variable interest entities (VIEs) and non-VIEs. Specifically, the FASB discussed how rights held by other parties — one of the three factors1 identified in its proposed ASU2 — should affect whether (1) an entity is a VIE and (2) a decision maker should consolidate the VIE. The FASB did not vote on either of these issues but directed the staff to perform further analysis. However, the FASB did tentatively decide that redemption rights should be viewed differently than liquidation rights, kickout rights, and substantive participating rights.

The FASB chairman also announced that, although the PCC had previously voted to finalize its private-company accounting alternative related to applying the VIE guidance to lessor entities under common control, the PCC would further discuss the alternative at its next meeting, thereby postponing the FASB endorsement process.


1 The other two factors in the proposal are (1) the fees paid to a decision maker and (2) the decision maker’s exposure to variability of returns from its other interests. The FASB is expected to discuss these factors at future meetings.

2 FASB Proposed Accounting Standards Update, Principal Versus Agent Analysis.

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