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The guidance in ASC 805 is also applicable to the consolidation of variable interest entities (VIEs) that are businesses when control is obtained under the VIE subsections of ASC 810-10. Even if the entity is not considered a business, the VIE subsections of ASC 810-10 refers to the guidance in ASC 805 for the recognition and measurement of assets and liabilities (except for goodwill) when consolidating the VIE. VIEs that are determined to be businesses must follow the disclosure requirements of ASC 805, as indicated in ASC 810-10-50-3.
If the primary beneficiary of a VIE transfers assets or liabilities to the VIE that is not a business at, after, or shortly before the date that the entity becomes the primary beneficiary, the assets are recognized at the same amounts at which the assets and liabilities would have been measured if they had not been transferred (i.e., no gain or loss is recognized) in accordance with ASC 810-10-30-3.
Figure BCG 2-3 provides the applicable guidance for the VIE subsections of ASC 810-10 in connection with a business combination. Although VIEs are accounted for under ASC 810, a model outside of ASC 805, the accounting for common differences between a business combination and an asset acquisition should also be considered in accounting for a VIE.
Figure BCG 2-3
Variable interest entities and business combinations
Scenario
Application of ASC 805
Acquired group is a:
Variable interest entity
Business
The consolidation of the VIE when control is obtained is considered a business combination. Apply the acquisition method in ASC 805. In this situation, the date the VIE must be consolidated should be used as the acquisition date. The primary beneficiary, the entity that consolidates the VIE, is identified as the acquirer in accordance with ASC 805-10-25-5 through ASC 805-10-25-6.
Acquired group is a:
Variable interest entity
Not a business
The consolidation of the VIE is considered an asset acquisition. Apply sections ASC 805-20-25, ASC 805-20-30, ASC 805-740-25-2 and ASC 805-740-30-1 to recognize and measure the VIE’s assets and liabilities, excluding goodwill, at fair value. The difference between (1) the fair value of any consideration transferred, the fair value of the noncontrolling interest in the VIE, and the reported amount of any previously held equity interests in the VIE (i.e., do not remeasure the previously held equity interests to fair value); and (2) the net amount of the VIE’s identifiable assets and liabilities recognized and measured in accordance with ASC 805 will be recognized as a gain or loss. No goodwill is recognized in accordance with ASC 810-10-30-3 through ASC 810-10-30-4.
Acquired group is:
Not a variable interest entity
Determine whether the acquired group is a business. If it is a business, apply ASC 805. If it is not a business, apply asset acquisition accounting (see PPE 2 for further information).
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