Defining Issues | June 2017

FASB proposes targeted improvements to consolidation guidance for VIEs

KPMG reports on a proposed ASU for ASC 810.  FASB proposes to provide a private company alternative and make targeted improvements to the related party guidance for VIEs.


FASB proposed ASU on ASC 810

  • A reporting entity that is required to determine whether it should consolidate a legal entity under the VIE guidance of ASC 810-10, Consolidation—Overall

Relevant dates

  • June 22, 2017 – FASB issued proposed ASU
  • September 5, 2017 – Comments due on proposed ASU

Key impacts

Proposed ASU would:

Private companies

  • Provide an accounting policy election to exempt private companies1 from having to apply the VIE guidance in ASC 810 to other private legal entities under common control, including those involved in common control leasing arrangements.

All reporting entities

  • Align the evaluation of whether a decision maker's fee is a variable interest with the guidance in the primary beneficiary test2, as amended by ASU 2016-17
  • Remove the related party tie-breaker test and amend the consolidation guidance for situations in which a related party group of commonly controlled entities holds a controlling financial interest and no single entity within the related party group has a controlling financial interest. This proposed guidance would also apply to a related party group in which power is shared 

The amended guidance would require consolidation by an individual member of the related party group that holds a variable interest in a VIE when substantially all of the activities of the VIE involve, or are conducted on behalf of, that member.

If substantially all of the activities of the VIE do not involve (and are not conducted on behalf of) a single member of a related party group, the amended guidance would provide conditions for a reporting entity to consider in determining whether an individual member of a related party group has a controlling financial interest in the VIE.

  • Clarify that if the parent of a common control group has a controlling financial interest in a VIE on a consolidated basis, that parent is required to consolidate the VIE, regardless of whether any of its controlled subsidiaries consolidates.


  • The FASB will set the effective date when it considers the feedback on the proposal. Early adoption would be allowed
  • Proposed retrospective application to all relevant prior periods beginning with the first fiscal year in which ASU 2015-02, Amendments to the Consolidation Analysis, was initially applied
  • Proposed that all entities adopt the amendments at the same time


  1. The reporting entity, the common control parent and the legal entity being evaluated for consolidation cannot be public business entities.
  2. When evaluating whether a decision maker’s fee is a variable interest, an indirect interest held by a decision maker in a VIE through a related party under common control would be considered on a proportionate basis.




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