A New Path for Private Companies With VIEs



Many private companies frequently engage in common control arrangements that may be subject to complex variable-interest entity (VIE) guidance.

Last year, FASB issued a financial accounting and reporting standard that provides private companies an accounting policy election not to apply VIE guidance to legal entities under common control (including common control leasing arrangements) when certain criteria are met as long as the common control parent and the legal entity being evaluated for consolidation are not public. (See FASB Accounting Standards Update No. 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities.)

This standard is effective for private companies in fiscal years beginning after Dec. 15, 2020, and early adoption is permitted. And although companies still have a while to implement the standard (unless they want to adopt early), we have been receiving some private company stakeholder questions as to how FASB developed the standard in the first place and how it actually works.

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Source: Journal of Accountancy

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