Consolidation Guidance for Entities under Common Control Amended
New guidance has been issued for businesses that evaluate the consolidation of a variable interest entity under common control. The amendments under Accounting Standards Update (“ASU”) No. 2016-17, Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control, change the assessment of whether a reporting entity is the variable interest entity’s primary beneficiary. ASU 2015-02 required that entities that were the single decision making treat related parties that were under common control differently that other related parties. The new guidance will now require a single decision maker to consider interests held through related parties under common control on a proportionate basis consistent with indirect interests held through other related parties. Despite the ASU, the characteristics of a primary beneficiary under GAAP remain as is.
The Financial Accounting Standards Board says the amendments will be effective for public businesses for fiscal years, and interim periods within those years, starting after December 15, 2016. All other businesses must apply the amendments for fiscal years starting after December 15, 2016, and interim periods within those years starting after December 15, 2017. Early adoption is allowed.