FASB issues Interpretation no. 46, Consolidation of Variable Interest Entities, which applies to a broad array of such organizations including special-purpose entities, off-balance-sheet structures and, generally, corporations, partnerships.
FASB issues Interpretation no. 46, Consolidation of Variable Interest Entities, which applies to a broad array of such organizations including special-purpose entities, off-balance-sheet structures and, generally, corporations, partnerships, trusts or any other business-oriented legal structures that either do not have equity investors with voting rights or have shareholders who provide financial resources insufficient to support the entity's activities. Previously, companies had not included another entity in their consolidated financial statements unless they controlled it through voting interests. But the interpretation seeks to improve financial reporting by companies with ties to such entities by requiring them to consolidate an entity's financial statements with their own if the company is subject to the majority of either the risk or the benefit resulting from the entity's activities. The consolidation requirements take effect immediately for variable interest entities created after January 31; they apply to older entities in the first fiscal year or interim period beginning after June 15. Certain of the interpretation's disclosure requirements affect all financial statements issued after January 31 regardless of when the variable interest entity was established. The interpretation is available from FASB online at www.fasb.org/int46.shtml or by calling 800-748-0659.
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|Publication:||Journal of Accountancy|
|Date:||Apr 1, 2003|
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