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Appendix D — Voting Interest Entity Model

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

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

In addition to considering noncontrolling rights, under ASC 810-10-15-10(a)(1), a majority owner of voting interests would not consolidate a legal entity in the following circumstances:
  • The subsidiary is undergoing a legal reorganization.
  • The subsidiary is in bankruptcy.
  • The subsidiary operates under foreign exchange restrictions, controls, or other governmentally imposed uncertainties that are so severe that they cast significant doubt on the parent’s ability to control the subsidiary.
  • Control exists through means other than ownership of a majority voting interest or a majority of kick-out rights. For example, a majority owner of voting interests would not consolidate a legal entity if:
    • ASC 810-30 is applied to determine the consolidation status of a research and development arrangement.
    • The subsections of ASC 810-10 on the consolidation of contract-controlled entities are applied to determine whether a contractual management relationship represents a controlling financial interest.
    • ASC 710-10-45-1 is applied. That paragraph addresses the circumstances in which the accounts of a rabbi trust that is not a VIE are consolidated with the accounts of the employer in the financial statements of the employer.

Footnotes

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See Chapter 3 of Deloitte’s Roadmap Equity Method Investments and Joint Ventures for additional details.