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The SEC staff continues to ask registrants to:
  • clarify how they determined whether they were or were not the primary beneficiary of a variable interest entity (VIE);
  • provide disclosures required by ASC 810 for consolidated entities that were determined to be a VIE;
  • present attributing net income and comprehensive income to the parent and the noncontrolling interest; and
  • provide disclosures about accounting for potential changes in the redemption value of redeemable non-controlling interests.
Comment examples (generalized to identify overarching themes, with specific details pertaining to individual companies omitted)
Guidance references
  • We note that you completed the acquisition of an 80% non-controlling ownership interest in an acquisition and that you are accounting for such acquisition using the equity method of accounting. In order to better understand the Company's accounting for this transaction, please further tell us the following: How the Company considered the variable interest guidance in ASC 810-10-15-14 and whether the acquisition resulted in an acquired VIE; and if the acquisition did not result in the acquisition of a VIE, how the Company considered the guidance under ASC 810-10-15-8, ASC 810-10-15-8A and ASC 810-10-15-10a such that it resulted in the Company owning an 80% interest but not consolidating.
  • We note that substantially all of your consolidated affiliates are considered variable interest entities; however, we do not see where you have provided the disclosures required by ASC 810-10-45-25 and ASC 810-10-50-3. Please tell us how you considered disclosure of the nature of any restrictions on the consolidated VIE's assets and on the settlement of its liabilities reported in the statement of financial position, including the carrying amounts of such assets and liabilities, or tell us why this information is not required.
  • Please provide a description of the methods and assumptions used to attribute your net loss to controlling and non-controlling interests that are linked to the parent and subsidiary allocations disclosed in footnote. In this regard, explain your consideration of terms governing agreements as indicative of profit-sharing arrangements between the parties. Refer to ASC 810-10-45- 18 through 45-21. Expand your disclosure accordingly.
  • Your disclosures indicate that you recognized redeemable non-controlling interests at fair value using Level 3 inputs in connection with recent acquisitions. We also note that these non-controlling interests are potentially redeemable at a multiple of each acquired entity's trailing twelve-month EBITDA. Given this factor, please revise to explain how you plan to account for potential changes in the redemption value of these redeemable non-controlling interests in your financial statements. Refer to the guidance in paragraph 15 of ASC 480-10-S99-3A.

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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