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This chapter describes the voting interest entity consolidation models for corporations and limited partnerships. It also describes the consolidation by contract model. The voting interest entity consolidation models for corporations and limited partnerships are not the same. Therefore, entities that are not clearly corporations or limited partnerships, such as limited liability companies and trusts, should determine whether their governing provisions as described in their governing documents make them more like a corporation or a limited partnership in deciding which model to apply.
The voting interest entity model (referred to as the “VOE” model) requires the reporting entity to have a controlling financial interest in an entity. A controlling financial interest is generally based on the concept that a reporting entity should have the unilateral right to make the significant financial and operating decisions of an entity without regard to probability.
The voting interest entity model applies to all entities that are not variable interest entities (VIEs). That is, the voting interest model applies after an investor considers whether it has a variable interest in a VIE and determines that the investee is not a VIE. If an entity is not a VIE under ASC 810-10-15-14, the following consolidation guidance under ASC 810 should be considered to determine the appropriate consolidation model depending on the type of entity or arrangement:
  • Majority-owned subsidiaries (corporations), see CG 3.2 through 3.4
  • Limited partnerships (LPs), see CG 3.5
  • Entities controlled by contract, see CG 3.6
  • Entities controlled by contract, see CG 3.6
  • Research and development arrangements, see CG 6.3.1
Figure 3-1 summarizes the voting interest consolidation model for corporations, limited partnerships, and similar entities.
Figure 3-1
Summarized voting interest consolidation model
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