variable interest entity

This Subtopic tells a REIT how to account for its investment in a "service corporation" — an affiliated entity, typically holding non-qualifying REIT activities, whose voting stock is largely held by others. Even without a voting majority, listed factors (activities performed primarily for the REIT, economic benefits flowing to the REIT, common board members/officers, nominal outside equity, management influence, access to financial information) indicate the REIT has at least significant influence, requiring the equity method or consolidation based on facts and circumstances (323-974-25-1). Service corporations that are variable interest entities are excluded and are instead evaluated under the VIE Subsections of Section 810-10.

This subtopic tells a real estate developer when it must record a liability for infrastructure debt issued by a municipality (special assessments) or by a tax increment financing (TIF) entity. The core rule is a presumption of liability recognition when the assessment levied on each individual property owner is a fixed or determinable amount for a fixed or determinable period (470-970-25-1); if the assessment is not fixed or determinable, no obligation is recorded, but credit support features (shortfall make-up, pledged assets, letters of credit) must be evaluated as contingencies under Topic 450 and possibly as guarantees under Topic 460.

ASC 810-10 sets out the pervasive framework for determining whether one reporting entity must consolidate another legal entity, and it is organized into three Subsections: General (voting interest model), Variable Interest Entities (VIE model), and Consolidation of Entities Controlled by Contract. Consolidation is required when a reporting entity has a "controlling financial interest" — usually ownership of a majority voting interest (or, for limited partnerships, a majority of kick-out rights through voting interests) under the General Subsections, or, for a VIE, both power over the activities that most significantly impact the VIE's economic performance and exposure to potentially significant losses/benefits. A reporting entity must first test whether the other entity is a VIE (810-10-15-14); only if it is not does the voting-interest or contractual-control analysis apply.

ASC 810-20 formerly provided the consolidation model for limited partnerships and similar entities, addressing when a general partner controls a limited partnership (the "kick-out rights"/substantive participating rights analysis) and must consolidate it. Every paragraph in the subtopic — Sections 05, 15, 25, 45, and 55 — was superseded by ASU 2015-02 (Amendments to the Consolidation Analysis). Limited partnerships and similar entities are now evaluated under the general variable interest entity and voting interest models in Subtopic 810-10 and, for equity method purposes, 323-30.

ASC 810-915 was the intersection subtopic that applied the consolidation guidance of Topic 810 to development stage entities (entities devoting substantially all efforts to establishing a new business without significant revenue). Every paragraph in this subtopic — including its scope, overview, and subsequent measurement guidance — was superseded by Accounting Standards Update No. 2014-10, which eliminated the concept of a development stage entity from U.S. GAAP. There is therefore no remaining substantive guidance here; consolidation of such entities is analyzed solely under the general Topic 810 model.

This Subtopic gives the industry-specific consolidation guidance for brokers and dealers in securities. Its single substantive rule is a presentation exception: a broker-dealer parent within the scope of Topic 940 does not consolidate a majority-owned subsidiary in which it has a controlling financial interest (and that is not a variable interest entity) when control is likely to be temporary (810-940-45-1, cross-referencing 810-10-15-10(a)(2)).

This Subtopic tells bank holding companies how to present trust-preferred securities structures. Because the sponsoring bank holds no variable interest in the special-purpose trust, it cannot be the trust's primary beneficiary and does not consolidate it (810-942-55-2). Instead, the bank reports the subordinated debentures it issued to the trust as debt on its balance sheet, and accounts for its holding of the trust's common securities under the equity method (810-942-45-1).

ASC 810-952 was the franchisor-specific consolidation guidance within the Consolidation topic, addressing when a franchisor should consolidate a franchisee entity (typically under the variable interest entity model). Every paragraph in the subtopic — the overview, scope, and implementation guidance and illustrations — was superseded by Accounting Standards Update No. 2009-17. As a result, the subtopic contains no operative guidance; franchisors apply the general consolidation model in ASC 810-10.

ASC 810-970 gives real-estate-specific consolidation guidance layered on top of ASC 810-10. It explains when an investor controls a general or limited partnership that holds real estate (majority voting interest, or majority of profit/loss interests when voting interests are unclear), when substantive participating rights of other partners overcome the presumption of control, and when a noncontrolling investor instead uses the equity method. It also sets the five conditions that permit proportionate (undivided interest) presentation of an investment in real property.

This Subtopic tells a time-sharing developer-seller how to account for special-purpose entities (SPEs) it establishes in connection with selling time-sharing intervals. If the SPE structure is legally required by the jurisdiction in order to sell intervals to nonresident customers and the SPE holds no assets other than the time-sharing intervals and has no debt, the SPE is viewed as lacking economic substance and existing solely to facilitate sales; the seller then reports the unsold interests in the SPE as time-sharing inventory on its balance sheet rather than applying consolidation or equity/cost method accounting. All other SPEs are evaluated under the normal consolidation, VIE, and investment models.

ASC 860-40 formerly governed transfers of financial assets to qualifying special-purpose entities (QSPEs), which under pre-2010 GAAP were exempt from consolidation and could support sale accounting for the transferor. Every substantive paragraph in the subtopic (Sections 05, 10, 15, 25, 40, 45 and 55) was superseded by ASU 2009-16 (formerly FAS 166), which eliminated the QSPE concept entirely. The subtopic is now an empty shell retained only for reference; transfers to securitization entities are analyzed under the general derecognition conditions of ASC 860-10 and the consolidation guidance in ASC 810.

ASC 915-10 formerly set out the "Overall" guidance for development stage entities — entities devoting substantially all efforts to establishing a new business that had no principal operations or no significant revenue. All of its substantive content (scope, background, and the transition paragraph) was superseded by ASU 2014-10, which eliminated the incremental reporting requirements for development stage entities; the transition guidance in 915-10-65-1 was itself superseded on 06/23/2016 after the transition period ended. The subtopic is now an empty shell with no operative U.S. GAAP requirements.