Variable interest entity

From Wikipedia, the free encyclopedia
  (Redirected from Variable Interest Entity)
Jump to: navigation, search

Variable interest entity (VIE) is a term used by the United States Financial Accounting Standards Board (FASB) in FIN 46 to refer to an entity (the investee) in which the investor holds a controlling interest that is not based on the majority of voting rights. It is closely related to the concept of a special purpose entity. The importance of identifying a VIE is that a company needs to consolidate such entities if it is the primary beneficiary of the VIE.

Note: The guidance in FIN 46 and FIN 46R was subsequently revised when FASB issued Statement 167.[1]

Criteria[edit]

A VIE is an entity meeting one of the following three criteria as elaborated in FASB ASC 810-10 [formerly FIN 46 (Revised)]:

  • The equity-at-risk is not sufficient to support the entity's activities (e.g.: the entity is thinly capitalized, the group of equity holders possess no substantive voting rights, etc.)
  • As a group, the equity-at-risk holders cannot control the entity
  • The economics do not coincide with the voting interests (commonly known as the "anti-abuse rule")

References[edit]