Appendix D — Voting Interest Entity Model

A reporting entity with an economic interest in a legal entity that does not qualify for a general exception to the requirements for consolidation must apply the consolidation guidance in ASC 810-10.1 That guidance is presented in the following three main subsections: (1) “General,” (2) “Variable Interest Entities,” and (3) “Consolidation of Entities Controlled by Contract.”

Only after the reporting entity has determined that the legal entity is not subject to the VIE model (see Chapter 5) does it apply the "general" guidance or the guidance on the consolidation of entities controlled by contract.

The general guidance applies to voting interest entities (referred to hereafter as the “voting interest entity model”). The guidance on the consolidation of entities controlled by contract (referred to hereafter as the “contract-controlled entity model”) applies in certain situations in which a legal entity that is not a VIE is controlled through a contractual management relationship. Under both the voting interest entity model and the contract-controlled entity model, a reporting entity consolidates a legal entity when it has a controlling financial interest in the legal entity. This appendix provides additional guidance on the voting interest entity and contract-controlled entity models. See Table 1-1 in Section 1.4 for differences between the voting interest entity model and the VIE model.

The determination of whether a reporting entity should consolidate a voting interest entity is a continual process. That is, the reporting entity should monitor specific transactions or events that affect whether it holds a controlling financial interest.

D.3 Exceptions to Consolidation by Owner of Majority Voting Interests