# ASC 810-10-05: Consolidation — Overall — 05 Overview and Background Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/810/10/#05-overview-and-background) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T01:28:45.083Z to 2026-09-10T01:28:45.083Z Record version: sha256:e5c60c342d75ab99c62607170897b53b04ea7413d043ab0e0b3470e84c018928 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 810-10-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/810/10/#05-overview-and-background) SEC content: no ##### [810-10-05-1](https://asc.understandingaccounting.org/asc/810/10/#810-10-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:28:45.083Z to 2026-09-10T01:28:45.083Z Record version: sha256:dfe90603c2abda8bd2eca464b230900e7c299ac9701b8fa1fb1ad9558c695eca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Consolidation Topic provides guidance on entities subject to consolidation as well as on how to consolidate. Paragraph [810-10-10-1](https://asc.understandingaccounting.org/asc/810/10/#810-10-10-1) discusses the objectives of consolidation. ##### [810-10-05-2](https://asc.understandingaccounting.org/asc/810/10/#810-10-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:28:45.083Z to 2026-09-10T01:28:45.083Z Record version: sha256:30982ce8387cfc033acce30430c55559626c0998c006e4b3db9321dc01364e45 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Topic includes the following Subtopics: 1. a Overall 2. b [Subparagraph superseded by Accounting Standards Update No. 2015-02](https://asc.understandingaccounting.org/updates/asu-2015-02/). 3. c Research and Development Arrangements. ##### [810-10-05-3](https://asc.understandingaccounting.org/asc/810/10/#810-10-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:28:45.083Z to 2026-09-10T01:28:45.083Z Record version: sha256:08061fee318c9a7772bacd5470133a7720c9febf7842844fc0d915407c7c4c1a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Throughout this Subtopic, any reference to a [limited partnership](https://asc.understandingaccounting.org/glossary/l/#limited-partnership "An association in which one or more general partners have unlimited liability and one or more partners have limited liability. A limited partnership is usually managed by the general partner or partners, subject to limitations, if any, imposed by the partnership agreement.") includes limited partnerships and similar [legal entities](https://asc.understandingaccounting.org/glossary/l/#legal-entity "Any legal structure used to conduct activities or to hold assets. Some examples of such structures are corporations, partnerships, limited liability companies, grantor trusts, and other trusts."). A _similar legal entity_ is an entity (such as a limited liability company) that has governing provisions that are the functional equivalent of a limited partnership. In such entities, a managing member is the functional equivalent of a general partner, and a nonmanaging member is the functional equivalent of a limited partner. ##### [810-10-05-4](https://asc.understandingaccounting.org/asc/810/10/#810-10-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:28:45.083Z to 2026-09-10T01:28:45.083Z Record version: sha256:9d7af402da9f6f5149428c5099123ab74905604c0a9f1f0537063a20bbd7efb0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic is presented in the following three Subsections: 1. a General 2. b Variable Interest Entities 3. c Consolidation of Entities Controlled by Contract ##### [810-10-05-5](https://asc.understandingaccounting.org/asc/810/10/#810-10-05-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:28:45.083Z to 2026-09-10T01:28:45.083Z Record version: sha256:e8212db5dbf3d271d58f5dd0e2a12b7c7bce8764d34ef961f64f44a157f96d7f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2015-02](https://asc.understandingaccounting.org/updates/asu-2015-02/). ##### [810-10-05-6](https://asc.understandingaccounting.org/asc/810/10/#810-10-05-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:28:45.083Z to 2026-09-10T01:28:45.083Z Record version: sha256:9832a96a7599f2b3f618b6c0801d70faa6607961d3cb99e49ac1696b6ff1d930 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following flowchart provides an overview of the guidance in this Subtopic for evaluating whether a reporting entity should consolidate another legal entity. The flowchart does not include all of the guidance in this Subtopic and is not intended as a substitute for the guidance in this Subtopic. For example, the flowchart does not illustrate the consolidation analysis for entities controlled by contract. - ![](https://asc.understandingaccounting.org/asc-img/GUID-82A35722-010F-477A-B04F-350A446AFFFE-low.gif)![](https://asc.understandingaccounting.org/asc-img/GUID-4D1EDBEF-7A8B-4991-A46F-4E3CAFD0C33C-low.gif)![](https://asc.understandingaccounting.org/asc-img/GUID-EC931A92-4588-4A0C-B38A-8111AAE02555-low.gif) Text only report Displayed Text Consolidation Analysis in Subtopic 810-10 "Does a Variable Interest Entities (VIE) Subsection scope exception apply? (810-10-15-17)" "Does a scope exception from the consolidation guidance apply? (810-10-15-12)" NO "Does the reporting entity have a variable interest in the legal entity? (810-10-55-16 through 55-41)" NO "Is the legal entity a VIE?2 (810-10-15-14)" YES YES YES NO NO YES Stop consolidation analysis1 "Is the entity being evaluated for consolidation a legal entity? (810-10-15-4)" YES Stop consolidation analysis1 NO Evaluation under Voting Interest Model Evaluation under Variable Interest Model "1Consolidation not required; however, evaluation of other generally accepted accounting principles (GAAP) may be relevant to determine recognition, measurement, or disclosure. 2A legal entity is a VIE if any of the following conditions exist: a. The equity investment at risk is not sufficient to finance the activities of the entity without additional subordinated financial support provided by any parties. b. As a group, the holders of the equity investment at risk lack any of the following characteristics of a controlling financial interest: 1. The power to direct the activities that most significantly impact the entity's economic performance: i. For legal entities other than limited partnerships, investors lack that power through voting rights or similar rights if no owners hold voting rights or similar rights (such as those of a common shareholder in a corporation). ii. For limited partnerships, partners lack that power if neither (01) nor (02) below exists: 01. A simple majority or lower threshold of limited partners (including a single limited partner) with equity at risk is able to exercise substantive kick-out rights through voting interests over the general partner(s). 02. Limited partners with equity at risk are able to exercise substantive participating rights over the general partner(s). 2. The obligation to absorb expected losses. 3. The right to receive expected residual returns. c. The equity investors' voting rights are not proportional to the economics, and substantially all of the activities of the entity either involve or are conducted on behalf of an investor that has disproportionately few voting rights." "Evaluation under Voting Interest Model" Stop consolidation analysis1 3 Power is defined as the power to direct the activities of a VIE that most significantly impact the VIE's economic performance. "Does the reporting entity, on a direct basis, have power3 and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE? (810-10-25-38A through 25-38J and 810-10-25-42)" "Are one or more related parties under common control with the single decision maker and, as a group, do they have power and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE? (810-10-25-44A)" Consolidate entity Consolidate entity YES NO YES "Is there a single decision maker or is power shared? (810-10-25-44)" NO "Single Decision Maker" Perform related party tie breaker test (810-10-25-44)—party most closely associated with VIE consolidates entity NO "As a group, do the reporting entity and its related parties (including de facto agents) have power3 and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE?" YES Shared Power NO Single variable interest holder (not the decision maker) consolidates Stop consolidation analysis1 YES "Evaluation under Variable Interest Model" "Are substantially all of the activities of the VIE conducted on behalf of a single variable interest holder (not the decision maker)? (810-10-25-44B)" "As a group, do the reporting entity and its related parties (including de facto agents) have power3 and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE?" "Does the reporting entity, on a direct and indirect basis, have power3 and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE? (810-10-25-38A through 25-38J and 810-10-25-42)" Perform related party tie breaker test (810-10-25-44)—party most closely associated with VIE consolidates entity YES Stop consolidation analysis1 NO YES Stop consolidation analysis1 NO "For legal entities other than limited partnerships, does the reporting entity own a majority voting interest? (810-10-25-1) For limited partnerships, does the reporting entity own a majority of the limited partnership's kick-out rights through voting interests? (810-10-25-1A)" "Evaluation under Voting Interest Model" YES "Do noncontrolling shareholders or partners hold substantive participating rights? (810-10-25-2 through 25-13A) OR Do other conditions exist (subsidiary in bankruptcy, legal reorganization, etc.) that would indicate that control does not rest with the reporting entity? (810-10-15-10(a))" NO Stop consolidation analysis1 Consolidate entity YES NO Stop consolidation analysis1 ##### [810-10-05-7](https://asc.understandingaccounting.org/asc/810/10/#810-10-05-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:28:45.083Z to 2026-09-10T01:28:45.083Z Record version: sha256:201e59247c11455121c36a6959f8c61b3b54631b2cc9ee37a841a3932b7d3c34 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). ### Variable Interest Entities #### Consolidation of VIEs ##### [810-10-05-8](https://asc.understandingaccounting.org/asc/810/10/#810-10-05-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:28:45.083Z to 2026-09-10T01:28:45.083Z Record version: sha256:8c82c8f5e1e02b140f0f4988ff45fce72434a44fbed486e6c78c73caa0a1459b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Variable Interest Entities Subsections clarify the application of the General Subsections to certain [legal entities](https://asc.understandingaccounting.org/glossary/l/#legal-entity "Any legal structure used to conduct activities or to hold assets. Some examples of such structures are corporations, partnerships, limited liability companies, grantor trusts, and other trusts.") in which equity investors do not have sufficient equity at risk for the legal entity to finance its activities without additional [subordinated financial support](https://asc.understandingaccounting.org/glossary/s/#subordinated-financial-support "Variable interests that will absorb some or all of a variable interest entity's (VIE's) expected losses.") or, as a group, the holders of the equity investment at risk lack any one of the following three characteristics: 1. a The power, through voting rights or similar rights, to direct the activities of a legal entity that most significantly impact the entity's economic performance 2. b The obligation to absorb the [expected losses](https://asc.understandingaccounting.org/glossary/e/#expected-losses "A legal entity that has no history of net losses and expects to continue to be profitable in the foreseeable future can be a variable interest entity (VIE). A legal entity that expects to be profitable will have expected losses. A VIE's expected losses are the expected negative variability in the fair value of its net assets exclusive of variable interests and not the anticipated amount or variability of the net income or loss.") of the legal entity 3. c The right to receive the [expected residual returns](https://asc.understandingaccounting.org/glossary/e/#expected-residual-returns "A variable interest entity's (VIE's) expected residual returns are the expected positive variability in the fair value of its net assets exclusive of variable interests.") of the legal entity. Paragraph [810-10-10-1](https://asc.understandingaccounting.org/asc/810/10/#810-10-10-1) states that consolidated financial statements are usually necessary for a fair presentation if one of the entities in the [consolidated group](https://asc.understandingaccounting.org/glossary/c/#consolidated-group "A parent and all its subsidiaries.") directly or indirectly has a controlling financial interest in the other entities. For legal entities other than limited partnerships, paragraph [810-10-15-8](https://asc.understandingaccounting.org/asc/810/10/#810-10-15-8) states that the usual condition for a controlling financial interest is ownership of a majority voting interest. For limited partnerships, paragraph [810-10-15-8A](https://asc.understandingaccounting.org/asc/810/10/#810-10-15-8A) states that the usual condition for a controlling financial interest is ownership of a majority of the limited partnership's [kick-out rights](https://asc.understandingaccounting.org/glossary/k/#kick-out-rights-voting-interest-entity-definition "The rights underlying the limited partner's or partners' ability to dissolve (liquidate) the limited partnership or otherwise remove the general partners without cause.") through voting interests. However, application of the majority voting interest and kick-out rights requirements in the General Subsections of this Subtopic to certain types of entities may not identify the party with a controlling financial interest because the controlling financial interest may be achieved through arrangements that do not involve voting interests or kick-out rights. ##### [810-10-05-8A](https://asc.understandingaccounting.org/asc/810/10/#810-10-05-8A) Pending content: no Source downloaded (UTC): 2026-09-10T01:28:45.083Z to 2026-09-10T01:28:45.083Z Record version: sha256:45ffdce5f82c8b85b4080f66adf9e93d996f2910f6c00af4ee4a1dbcea8e9758 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The reporting entity with a variable interest or interests that provide the reporting entity with a controlling financial interest in a [variable interest entity](https://asc.understandingaccounting.org/glossary/v/#variable-interest-entity "A legal entity subject to consolidation according to the provisions of the Variable Interest Entities Subsections of Subtopic 810-10.") (VIE) will have both of the following characteristics: 1. a The power to direct the activities of a VIE that most significantly impact the VIE's economic performance 2. b The obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. ##### [810-10-05-9](https://asc.understandingaccounting.org/asc/810/10/#810-10-05-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:28:45.083Z to 2026-09-10T01:28:45.083Z Record version: sha256:e74691551b4e537d54acd0bf4ed867f8556e20086020530d1fadded6b3b69ab1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Variable Interest Entities Subsections explain how to identify VIEs and how to determine when a reporting entity should include the assets, liabilities, [noncontrolling interests](https://asc.understandingaccounting.org/glossary/n/#noncontrolling-interest "The portion of equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. A noncontrolling interest is sometimes called a minority interest."), and results of activities of a VIE in its consolidated financial statements. Transactions involving VIEs are common. Some reporting entities have entered into arrangements using VIEs that appear to be designed to avoid reporting assets and liabilities for which they are responsible, to delay reporting losses that have already been incurred, or to report gains that are illusory. At the same time, many reporting entities have used VIEs for valid business purposes and have properly accounted for those VIEs based on guidance and accepted practice. ##### [810-10-05-10](https://asc.understandingaccounting.org/asc/810/10/#810-10-05-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:28:45.083Z to 2026-09-10T01:28:45.083Z Record version: sha256:fdae94658d28fd2a97aedcfdac2589125d498fd7fb2f84194a487e451d3cb758 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Some relationships between reporting entities and VIEs are similar to relationships established by majority voting interests, but VIEs often are arranged without a governing board or with a governing board that has limited ability to make decisions that affect the VIE's activities. A VIE's activities may be limited or predetermined by the articles of incorporation, bylaws, partnership agreements, trust agreements, other establishing documents, or contractual agreements between the parties involved with the VIE. A reporting entity implicitly chooses at the time of its investment to accept the activities in which the VIE is permitted to engage. That reporting entity may not need the ability to make decisions if the activities are predetermined or limited in ways the reporting entity chooses to accept. Alternatively, the reporting entity may obtain an ability to make decisions that affect a VIE's activities through contracts or the VIE's governing documents. There may be other techniques for protecting a reporting entity's interests. In any case, the reporting entity may receive benefits similar to those received from a controlling financial interest and be exposed to risks similar to those received from a controlling financial interest without holding a majority voting interest (or without holding any voting interest). The power to direct the activities of a VIE that most significantly impact the entity's economic performance and the reporting entity's exposure to the entity's losses or benefits are determinants of consolidation in the Variable Interest Entities Subsections. The Variable Interest Entities Subsections also provide guidance on determining whether fees paid to a [decision maker](https://asc.understandingaccounting.org/glossary/d/#decision-maker "An entity or entities with the power to direct the activities of another legal entity that most significantly impact the legal entity's economic performance according to the provisions of the Variable Interest Entities Subsections of Subtopic 810-10.") or service provider should be considered a variable interest in a VIE. ##### [810-10-05-11](https://asc.understandingaccounting.org/asc/810/10/#810-10-05-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:28:45.083Z to 2026-09-10T01:28:45.083Z Record version: sha256:1aa895550fe17912ee765e81ca59e5a5698a81dc18adff89cd2051f9bbf0ccb8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. VIEs often are created for a single specified purpose, for example, to facilitate securitization, leasing, hedging, research and development, [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder."), or other transactions or arrangements. The activities may be predetermined by the documents that establish the VIEs or by contracts or other arrangements between the parties involved. However, those characteristics do not define the scope of the Variable Interest Entities Subsections because other entities may have those same characteristics. The distinction between VIEs and other entities is based on the nature and amount of the equity investment and the rights and obligations of the equity investors. ##### [810-10-05-12](https://asc.understandingaccounting.org/asc/810/10/#810-10-05-12) Pending content: no Source downloaded (UTC): 2026-09-10T01:28:45.083Z to 2026-09-10T01:28:45.083Z Record version: sha256:f8294e901276766806b11b82aedc15990a52cc6f20e2a572a00ddb1d13b2a89d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because the equity investors in an entity other than a VIE generally absorb losses first, they can be expected to resist arrangements that give other parties the ability to significantly increase their risk or reduce their benefits. Other parties can be expected to align their interests with those of the equity investors, protect their interests contractually, or avoid any involvement with the entity. ##### [810-10-05-13](https://asc.understandingaccounting.org/asc/810/10/#810-10-05-13) Pending content: no Source downloaded (UTC): 2026-09-10T01:28:45.083Z to 2026-09-10T01:28:45.083Z Record version: sha256:443e25b74d4841aeb17beaef8975559430170a5064e521f2602b609e73fab81a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In contrast, either a VIE does not issue voting interests (or other interests with similar rights) or the total equity investment at risk is not sufficient to permit the legal entity to finance its activities without additional subordinated financial support. If a legal entity does not issue voting or similar interests or if the equity investment is insufficient, that legal entity's activities may be predetermined or decision-making ability is determined contractually. If the total equity investment at risk is not sufficient to permit the legal entity to finance its activities, the parties providing the necessary additional subordinated financial support most likely will not permit an equity investor to make decisions that may be counter to their interests. That means that the usual condition for establishing a controlling financial interest as a majority voting interest does not apply to VIEs. Consequently, a consolidation analysis that focuses on ownership of voting stock is not appropriate for such entities. ### Consolidation of Entities Controlled by Contract ##### [810-10-05-14](https://asc.understandingaccounting.org/asc/810/10/#810-10-05-14) Pending content: no Source downloaded (UTC): 2026-09-10T01:28:45.083Z to 2026-09-10T01:28:45.083Z Record version: sha256:ba7dc734ec80cd6fc68c1c71ad40d28abf805d451a5aef14528befaf6a202f69 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Consolidation of Entities Controlled by Contract Subsections provide guidance on the consolidation of entities controlled by contract that are not determined to be [variable interest entities](https://asc.understandingaccounting.org/glossary/v/#variable-interest-entity "A legal entity subject to consolidation according to the provisions of the Variable Interest Entities Subsections of Subtopic 810-10.") (VIEs) (see the [Variable Interest Entities Subsection](https://asc.understandingaccounting.org/asc/810/10/#15-scope-and-scope-exceptions) of Section 810-10-15). As indicated in paragraph [810-10-15-19](https://asc.understandingaccounting.org/asc/810/10/#810-10-15-19), the guidance in the Consolidation of Entities Controlled by Contract Subsections is to be applied to all entities controlled by contract, despite the fact that the context of the guidance is physician practice management entities. ##### [810-10-05-15](https://asc.understandingaccounting.org/asc/810/10/#810-10-05-15) Pending content: no Source downloaded (UTC): 2026-09-10T01:28:45.083Z to 2026-09-10T01:28:45.083Z Record version: sha256:a39400372c4933355cceb84095bc0778201f134ad8f3a795ef5e7297dcb27a5f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Contractual arrangements between entities that are in business to practice and dispense medicine (physician practices) and entities that are in business to manage the operations of those physician practices (physician practice management entities) are becoming increasingly common. The structure of those arrangements takes various forms, provides for varying degrees of participation in the management of the physician practice by the physician practice management entity, and provides for various financial arrangements. ##### [810-10-05-16](https://asc.understandingaccounting.org/asc/810/10/#810-10-05-16) Pending content: no Source downloaded (UTC): 2026-09-10T01:28:45.083Z to 2026-09-10T01:28:45.083Z Record version: sha256:737e55816b817e27df28bd402dac6475551cc77efafccc80f98f2c185cb44194 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Many of the arrangements between physician practices and physician practice management entities arise when the physician practice management entity seeks to acquire the physician practice. Legal or business reasons often preclude the physician practice management entity from acquiring the physician practice's outstanding equity instruments and, if that is the case, then, as an alternative, the physician practice management entity often will acquire some or all of the net assets of the physician practice, assume some or all of the contractual rights and responsibilities of the physician practice, and execute a long-term management agreement to operate the physician practice with the owners of the physician practice (typically the physicians) receiving consideration in exchange. In addition to obtaining a long-term management agreement, the physician practice management entity often will secure the future services of individual physicians employed in the physician practice through employment and noncompete agreements.