Project Update

Consolidation Targeted Improvements to Related Party Guidance for Variable Interest Entities

Last updated on October 5, 2017.  Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Updated sections are indicated with an asterisk *)

The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.

Project Objective and Background
*Due Process Documents
Decisions Reached at Last Meeting
Tentative Board Decisions Reached to Date
*Next Steps
Board/Other Public Meeting Dates
*Contact Information

Project Objective and Background

After the Board decided to add to its technical agenda a project on consolidation reorganization and targeted improvements at its November 2, 2016 Board meeting, the Board directed the staff to research issues related to applying the variable interest entity (VIE) model to entities under common control. The staff researched alternatives that would reduce the cost and complexity of applying the VIE related party guidance while maintaining useful information for users of financial statements.

At the March 8, 2017 Board meeting, the Board discussed research results and alternatives for addressing issues associated with the VIE related party guidance. The Board decided to add a project to its technical agenda separate from the project on consolidation reorganization and targeted improvements. The objective of the project is to make targeted improvements to the related party guidance for VIEs specific to the following items:
  1. Applying the VIE guidance to private companies under common control
  2. Considering indirect interests held through related parties under common control for determining whether fees paid to decision makers and service providers are variable interests
  3. Applying certain requirements when power is shared among related parties or when, as a group, related parties under common control have a controlling financial interest in a VIE but none of the parties individually conclude that they have a controlling financial interest. 
The Board directed the staff to draft a proposed Accounting Standards Update of the targeted improvements to related party guidance for VIEs for external review. The amendments in the proposed Update reflected decisions reached at the March 8, 2017 Board meeting for items a through c above.

*Due Process Documents

On June 22, 2017, the FASB issued Proposed Accounting Standards Update, Consolidations (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. The due date for comment letters ended on September 5, 2017.
  • Download the Proposed Accounting Standards Update, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities.
  • Read the FASB in Focus which summarizes the Proposed Accounting Standards Update.
  • Read the press release on the Proposed Accounting Standards Update.
  • Read the Comment Letters

Decisions Reached at Last Meeting (May 18, 2017)

The Board discussed the comments received from external reviewers on the draft of the proposed Update, including the following issues that required Board action.

Private Company Accounting Alternative

Determination of Whether Common Control Exists

The Board decided that the determination of whether common control exists should be consistent with the amendments in Accounting Standards Update No. 2014-07, Consolidation (Topic 810)—Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements.

Application of VIE Guidance for an Entity That No Longer Can Apply the Private Company Accounting Alternative

The Board decided that a reporting entity should apply the VIE guidance on a prospective basis if any of the conditions in the private company accounting alternative cease to be met except in situations in which the reporting entity becomes a public business entity. In those situations, the entity would apply VIE guidance in accordance with Topic 250, Accounting Changes and Error Corrections.

Effective Date and Transition Provisions

The Board decided that the effective date and transition provisions for all the amendments in the proposed Update should be consistent for all entities.

Decision-Making Fees

The Board decided that the term economic interest should be replaced with variable interest throughout paragraph 810-10-55-37D of the proposed Update.

Cost-Benefit Analysis and Comment Period

The Board decided that the benefits of the amendments in the proposed Update justify the expected costs. The Board decided that the comment period deadline for the proposed Update should be the later of 75 days from the issuance of the proposed Update and September 29, 2017.

Tentative Board Decisions Reached to Date (March 8, 2017)

May 18, 2017

See Decisions Reached at Last Meeting.

March 8, 2017

The Board directed the staff to draft a proposed Accounting Standards Update of the targeted improvements to related party guidance for VIEs, incorporating the proposed amendments resulting from the March 8, 2017 Board meeting, for external review.

November 2, 2016

The Board directed the staff to schedule a public roundtable meeting to discuss the potential reorganization of the consolidation guidance, as well as seek feedback on its considerations for how the related party guidance in the VIE model can be simplified.

February 3, 2016


At the February 3, 2016 Board meeting, the Board discussed, but decided not to include, the topic of Consolidation in an agenda Discussion Paper. Instead, the Board decided that preagenda research should continue.

*Next Steps

The Board will consider feedback received on the Proposed Accounting Standards Update at a future meeting.

Board/Other Public Meeting Dates

The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.

May 18, 2017 Board Meeting—The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot.

March 8, 2017
Board Meeting—The Board directed the staff to draft a proposed Accounting Standards Update for external review.
November 2, 2016 Board Meeting—The Board directed the staff to develop a staff draft of its tentative decision on the reorganization and considerations of simplifying the related party guidance for discussion at a public roundtable meeting.
February 3, 2016 Board Meeting—The Board discussed adding a project on consolidation to the research agenda.

Contact Information

Chris Roberge
Senior Project Manager
ceroberge@fasb.org

Michael Cheng
Supervising Project Manager
mkcheng@fasb.org

Seth Drucker
Practice Fellow
sdrucker@fasb.org

Cameron Bowen
Postgraduate Technical Assistant
cbowen@fasb.org

David Hoyer
Postgraduate Technical Assistant
dhoyer@fasb.org