United States

FASB Issues New Consolidation Guidance

Feb 23, 2015
From the Financial Reporting View

This edition of Defining Issues reports that on February 18, 2015, the FASB issued new consolidation guidance that changes the way reporting enterprises evaluate whether (a) they should consolidate limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are variable interests in a variable interest entity (VIE), and (c) variable interests in a VIE held by related parties of the reporting enterprise require the reporting enterprise to consolidate the VIE. It also eliminates the VIE consolidation model based on majority exposure to variability that applied to certain investment companies and similar entities. The new guidance excludes money market funds that are required to comply with Rule 2a-7 of the Investment Company Act of 1940 and similar entities from the U.S. GAAP consolidation requirements.

The new guidance is effective for public business entities in fiscal years beginning after December 15, 2015. It is effective one year later for all other entities. Early adoption is allowed, including early adoption in an interim period.

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