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Consolidation of Variable Interest Entities A Roadmap to Applying the Variable Interest Entities Consolidation Model March 2010

FASB material, copyright © by the Financial Accounting Foundation, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116, is reproduced with permission.

This publication is provided as an information service by the Accounting Standards and Communications Group of Deloitte & Touche LLP. It does not address all possible fact patterns and the guidance is subject to change. Deloitte & Touche LLP is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte & Touche LLP shall not be responsible for any loss sustained by any person who relies on this publication. As used in this document, “Deloitte” means Deloitte & Touche LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. March 2010

Contents
Acknowledgments Introduction Section 1 — Overview, Background, and Scope 1.01 1.02 Determining Which Consolidation Model to Apply Consideration of Substantive Terms, Transactions, and Arrangements Substantive Terms and Arrangements Scope and Scope Exceptions Overall Scope Considerations 1.03 1.04 1.05 1.06 1.07 1.08 1.09 1.10 1.11 Application of the VIE Model in ASC 810-10 to Non-SPEs Qualification of a SPE as a Voting Interest Entity Application of the VIE Model in ASC 810-10 to Multitiered Legal Entity Structures Application of the VIE Model in ASC 810-10 to a Single Entity Held by a Holding Company Elimination of the QSPE Scope Exception Determining Whether Employee Benefit Plans Should Apply the VIE Model in ASC 810-10 to Their Investments Scope Exception for Certain Investment Companies Definition of Governmental Organization Determining Whether a Governmental Organization Was Used to Circumvent the Provisions of the VIE Model in ASC 810-10 Scope Exception for Not-for-Profit Organizations Scope Exception for Not-for-Profit Organizations: Circumvention of the VIE Model in ASC 810-10 Accounting Guidance for NFPs as a Result of the VIE Model in ASC 810-10 Determining Whether Entities That Present Their Financial Statements Similarly to a NFP Can Qualify for the Not-for-Profit Scope Exception Retention of a For-Profit Reporting Entity’s Accounting Policies in the Consolidated Financial Statements of a Not-for-Profit Reporting Entity Scope Exception for Separate Accounts of Life Insurance Entities Meaning of the Term “Exhaustive Effort” Application of Exhaustive-Efforts Scope Exception to an Inactive Entity Created Before December 31, 2003 Definition of a Business Under ASC 810-10-15-17(d) Effect of the Change in the Definition of a Business on the Business Scope Exception

1 2 5
6 8 8 9 10 10 10 11 12 13 14 14 14 15 15 15 16 17 17 17 18 18 18 19 19 19 20 20 21 21 21

Scope Exception for Employee Benefit Plans Scope Exception Related to Investments Accounted for at Fair Value Scope Exception for Governmental Organizations

Scope Exception for Not-for-Profit Organizations 1.12 1.13 1.14 1.15 1.16

Scope Exception Related to Separate Accounts of Life Insurance Entities 1.17 1.18 1.19 1.20 1.21 Exhaustive-Efforts Scope Exception

Business Scope Exception

i

1.22 1.23 1.24 1.25 1.26 1.27 1.28 1.29 1.30 1.31

Applying the Business Scope Exception on a Reporting-Entity-by-Reporting-Entity Basis Determining When a Reporting Entity Should Assess Whether It Meets the Business Scope Exception Under the VIE Model in ASC 810-10 Definition of a Joint Venture and Joint Control as Used in the VIE Model in...
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