If an entity is a VIE, ASC 810-10 requires the primary beneficiary analysis to be performed at formation (or when a reporting initially becomes involved with the VIE), and at each subsequent reporting date. Changes in facts and circumstances occurring since the previous primary beneficiary determination should be considered as part of this ongoing assessment.

In establishing this requirement, the FASB noted that the requirement for reporting entities to continuously reassess whether they are the primary beneficiary of a VIE would provide benefits to the financial statement users that outweigh the anticipated costs to comply with the requirement. For example, if a reporting entity has a variable interest in a VIE in the form of a guarantee, and over time the VIE’s performance declines significantly, then the guarantor may become the primary beneficiary. This ongoing assessment is intended to be performed qualitatively.

When a reporting entity identifies a change in the primary beneficiary of a VIE, it should recognize the effects as of the date when the change occurred.

Because the primary beneficiary of a VIE must be reassessed on an ongoing basis, the determination of related parties (and de facto agents) must also be continuously reassessed.