Accounting consolidating partnerships
CPAs SHOULD RECONSIDER A DECISION ABOUT WHETHER an entity is a VIE if its situation changes so its equity investment at risk is no longer adequate, some or all of the equity investment is returned to investors or the entity undertakes additional activities, acquires additional assets or receives an additional equity investment that is at risk. 46(R) is causing reporting entities to make new decisions about whether affiliated entities need to be consolidated into their financial statements.The practical result of the new rules is that many reporting entities are adding significant assets and liabilities to their balance sheets.
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While the Board’s focus during deliberations was largely on the investment management industry, the ASU could have a significant impact on the consolidation conclusions of reporting entities in other industries.
For example: Although the ASU is expected to result in the deconsolidation of many entities, reporting entities will need to reevaluate all their previous consolidation conclusions.
A VIE MUST BE CONSOLIDATED INTO THE FINANCIAL statements of the primary beneficiary company when it does not have enough equity at risk or its equity investors lack any of three characteristics of controlling financial interest.
The equity at risk should be sufficient for the VIE to finance its activities without additional support.
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These brokerage statements may be used to track the monthly activity to provide accurate financial statements.