Our Variable Interest Entity (VIE) module will be release in beta this week. The accounting guidance applicable to variable interest entities is among the most complex ever issued by the Financial Accounting Standards Board (FASB). Our analysis module, which includes plain English explanations of the guidance, FAQs, examples and a web-based decision tree analysis tool, is designed to take the mystery out the guidance and make accessible to anyone with a general understanding of accounting.
The VIE consolidation model came into being in 2003 through FIN 46(R) primarily in response to the abuses of the so-called “voting interest entity” model by Enron that, in theory anyway, allowed Enron to keep significant losses off its books. The voting interest model focuses on voting rights as the key determinate of which party, if any, should consolidate an entity. The variable interest entity model does not replace the voting interest model; rather, it subordinates the voting interest entity model to a secondary position. If, after applying an incredibly complex analysis, the variable interest entity model is determined to not apply, then the voting interest entity model is used. The variable interest entity model considers factors other than voting rights to determine which party, if any, should consolidate an entity. The VIE model focuses on controlling financial interests in an entity other than voting rights.