2.2 Decision Maker

A legal entity may have multiple decision makers, examples of which include equity owners, asset managers, servicers of asset backed securitizations, real estate property managers, hotel operators, oil and gas plant operators, and utility plant operators.

Until the FASB issued ASU 2015-02, the concept of a “decision maker” was never formally defined. Many of ASU 2015-02’s amendments to ASC 810-10 focus on the evaluation of whether a reporting entity has the first characteristic of a controlling financial interest in a VIE (i.e., the power to direct the activities that most significantly affect the VIE’s economic performance). Paragraph BC76 of ASU 2015-02 states that if the conditions in ASC 810-10-55-37 through 55-38 are met, the decision maker is deemed to be acting as a fiduciary on behalf of the legal entity and its variable interest holders. Fees paid to such a decision maker would therefore not represent a variable interest in the legal entity, and the decision maker would not need to continue with its consolidation assessment of the legal entity. Conversely, if a decision maker does not meet all of the conditions in ASC 810-10-55-37 through 55-38, the fees paid to the decision maker would be considered a variable interest and further consideration under the VIE model would be required. See Section 4.4 for a detailed discussion of whether fees paid to an entity’s decision maker are considered a variable interest.