On May 12, 2016, FASB issued the proposed ASU No. 2016-260 Consolidation (Topic 810) – Interests Held through Related Parties that are under Common Control. This proposed ASU would amend the consolidation guidance on how a reporting entity that is a single decision maker of a variable interest entity (VIE) would treat an indirect interest in an entity held through related parties under common control with the reporting entity in determining the primary beneficiary of that VIE, which in turn could require the VIE to be consolidated with the reporting entity.
This proposed ASU does not change how a primary beneficiary of a VIE is determined, which requires determining if the entity has the power to direct the activities of the VIE that most significantly impact that VIE’s economic performance, and if the obligation to absorb losses of or receive benefits from the VIE which could be significant to the VIE. The proposed ASU would require that a reporting entity, once it determines it is the single decision maker of the VIE, include all of its direct and indirect interests (on a proportionate basis) held through related parties under common control as a group have in the VIE in determining if it is the primary beneficiary of that VIE.
As part of a separate initiative, the FASB may consider changing the guidance related to common control arrangements as well.
Comments can be submitted to FASB until July 25, 2016.