FASB Statement 167: Consolidation of Variable Interest Entities

Description

FASB significantly revamped its consolidation standards for variable interest entities when it released Statement No. 167 in June 2009. Those standards rework existing rules under FIN 46R for when a company must include a VIE on its books with a potentially huge impact on corporate balance sheets.

The criteria for determining an entity's VIE status have shifted, based now more on a company's "obligations" and "power" over an entity than on ownership percentage or absorption of losses. Complicating matters further are new disclosure requirements to explain consolidation decisions.

New standards cover fiscal years after Nov. 15, 2009, so they affect financials published as soon as March or April 2010. Advisors must prepare now for the standards, which require reevaluation of existing entity relationships, regardless of whether VIEs were previously consolidated.

Listen as our panel of experienced advisors sifts through the complexities of FAS 167 and bottom-lines actions that must be taken to comply with the new standards in time for the upcoming financial reports.

Outline

1. Changes in FAS 167 to consolidation rules for VIEs
   1. Review of FIN 46R
   2. Defining and identifying a “primary beneficiary” relationship
   3. Making sense of FASB’s concept of “economic power”
   4. Kick-out, participation, protective rights
   5. Reconsideration events
      1. Continual reconsideration concept
      2. Addition of new reconsideration events
2. New disclosures required in financial statements
   1. Explanation of judgments used in determining “primary beneficiary” relationship
   2. Specifics of financial support to VIE
   3. Terms of arrangements with VIEs
   4. Disclosures for entities other than primary beneficiaries
3. Reviewing past decisions and current relationships under the scope of the new standard
   1. Best practices for timely review of relationships
   2. Necessary modifications to financial statements for 2009 reporting
4. FAS 166 considerations
   1. Eliminated exemption for qualified special purpose entities (QSPEs)
   2. Applying consolidation rules for VIEs to a QSPE context

Benefits

The panel will help you make sense of these and other key aspects of FASB's new consolidation standard:

• Determining when to consolidate variable interest entities under FAS 167.
• Understanding the concept of economic power.
• Evaluating existing entity structures under the new framework.
• Making disclosures to explain consolidation decisions on financial statements.
• Analyzing whether to consolidate qualified special purpose entities (QSPEs).

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