FASB expands the private company VIE exemption and changes fee guidance for decision makers

_{Filed under: Consolidation}

KPMG reports on ASU 2018-17. The ASU provides a new private company variable interest entity exemption and changes how decision makers apply the variable interest criteria.

Applicability

ASU 2018-17

All entities that are required to determine whether they should consolidate a legal entity under the variable interest entity (VIE) guidance, including private companies that have elected the common control leasing alternative.

Relevant dates

Key impacts

• ASU 2018-17 provides private company reporting entities an accounting policy election not to apply the VIE guidance to interests in other private legal entities under common control as long as:
  • the common control parent is a private company; and
  • the private reporting entity does not have a controlling financial interest under the voting interest entity consolidation guidance. 
• The new guidance supersedes the current private company VIE exemption beyond common control leasing arrangements
• The ASU aligns the evaluation of whether a decision maker's fee is a variable interest with the guidance in the primary beneficiary test by requiring the decision maker to consider an indirect interest in a VIE held by related party under common control on a proportionate basis