CCH Learning Center

Variable Interest Entities: Application of FASB Interpretation No. 46

Interpretation No. 46 will significantly change whether entities included in its scope are consolidated by their sponsors, transferors, or investors. It introduces the variable interest model, which determines control based on potential variability in gains and losses of the entity being evaluated for consolidation.

The interpretation provides guidance for determining whether an entity lacks sufficient equity, or its equity holders lack adequate decision-making ability. Examples and exhibits are used in this course to illustrate important concepts.

Topics covered include:

• Entities and arrangements that are subject to the Interpretation
• Scope of the Interpretation
• Definition of terms
• Equity investment at risk
• Obligations and rights of equity holders
• Initial determination and reconsideration of a VIE
• Variable interests
• Expected losses, expected residual returns, and expected variability
• Effective date and transition