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9.2.1A Consolidation and equity method
Publication date: 27 May 2020
us NFP guide
ASC 810-10, Consolidation, describes two models used to evaluate relationships for consolidation: the voting interest entity (VOE) model and the variable interest entity (VIE) model. The variable interest entity model is described in the VIE subsections of ASC 810-10, and the voting interest model is described in the “general” subsections.
NFPs apply only the voting interest model (that is, a model based on voting rights), and, therefore, disregard the guidance in the VIE subsection of 810-10 (see CG 2.1.2.1). In addition, significant adjustments are required when applying the VOE guidance in the general subsections of ASC 810-10 to NFPs, summarized as follows:
- For business entities, the VOE model described in the general subsections of ASC 810-10 apply only if the VIE model cannot be applied. Said differently, when evaluating consolidation, business entities first consider whether the variable interest model applies and only if it does not, do they apply the voting interest model. NFPs, on the other hand, disregard any provisions that reference the need to first consider the VIE model.
- NFPs evaluate consolidation of limited partnerships using NFP-specific requirements in ASC 958-810, rather than the VOE guidance in the general subsections of ASC 810-10. Therefore, NFPs apply the guidance in the general subsections of ASC 810-10 only when evaluating potential consolidation of entities other than limited partnerships. References to limited partnerships in the general subsections of ASC 810-10 generally are disregarded, with limited exceptions (identified in NP 9.8).
The NFP-specific variations of the consolidation guidance are housed in incremental guidance in ASC 958-810, Not-for-profit entities—consolidation, and ASC 954-810, Health care entities—consolidation. The nucleus of this guidance is ASC 958-810-15-4 (and for NFP HCOs, ASC 954-810-15-3) and a companion flow chart in ASC 958-810-55-4, which directs NFPs to appropriate sections of the codification that address consolidation and application of the equity method in various ownership scenarios.
PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
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