2.15 Variable Interest Entity
ASC 810-10 — Glossary
Variable Interest Entity
A legal entity subject to consolidation according to the provisions of the Variable Interest Entities Subsections of
Subtopic 810-10.
A VIE is a legal entity that is outside the scope of the traditional voting
interest entity model. Specifically, a VIE does not qualify for any of the scope
exceptions under ASC 810-10-15-12 or ASC 810-10-15-17 and meets one of the following
three conditions:
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The equity investment at risk is not sufficient for the legal entity to finance its activities without additional subordinated financial support. Said differently, the equity investors do not have sufficient “skin in the game.”
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The equity investors at risk, as a group, lack the characteristics of a controlling financial interest. Equity investors do not have the attributes typically expected of an equity holder.
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The voting rights of some equity investors at risk are disproportionate to their obligation to absorb losses or right to receive returns, and substantially all of the activities are conducted on behalf of an equity investor at risk with disproportionately few voting rights. This is an anti-abuse provision designed to prevent structuring opportunities to circumvent consolidation under the voting interest entity model.