An updated analysis of the FASB's new standard amending the current consolidation guidance.
The FASB recently issued a new standard that makes targeted amendments to the current consolidation guidance. Our updated In depth provides a detailed summary of the key changes.
The FASB’s changes are designed to address most of the concerns of the asset management industry and end the deferral granted to investment companies from applying the VIE guidance. However, entities across all industries will be impacted, particularly those that use limited partnerships, e.g., the oil and gas, transportation, and real estate sectors. In addition, companies in any industry that outsource decision making or have historically applied the related party tiebreaker may see a change in their consolidation conclusion and disclosures. The new guidance also provides a new scope exception to registered money market funds and similar unregistered money market funds.
The standard is effective for calendar year-end public business entities in 2016, and early adoption is allowed, including in any interim period.
Note: This In depth supersedes In depth US2015-03 to reflect clarification obtained through discussions with the FASB, as well as additional points of consideration that we have noted. Specifically, this In depth includes additional information about the manner in which related party interests are considered throughout the VIE model. It also introduces a discussion around evaluating whether a general partner has power, and whether series mutual funds represent separate legal entities.