Deloitte
Accounting Research Tool
...
Chapter 3 — Scope

3.3 General Consolidation Scope Exceptions

3.3 General Consolidation Scope Exceptions

ASC 810-10
15-12 The guidance in this Topic does not apply in any of the following circumstances:
  1. An employer shall not consolidate an employee benefit plan subject to the provisions of Topic 712 or 715.
  2. Subparagraph superseded by Accounting Standards Update No. 2009-16
  3. Subparagraph superseded by Accounting Standards Update No. 2009-16
  4. Except as discussed in paragraph 946-810-45-3, an investment company within the scope of Topic 946 shall not consolidate an investee that is not an investment company.
  5. A reporting entity shall not consolidate a governmental organization and shall not consolidate a financing entity established by a governmental organization unless the financing entity meets both of the following conditions:
    1. Is not a governmental organization
    2. Is used by the business entity in a manner similar to a VIE in an effort to circumvent the provisions of the Variable Interest Entities Subsections.
  6. A reporting entity shall not consolidate a legal entity that is required to comply with or operate in accordance with requirements that are similar to those included in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds.
    1. A legal entity that is not required to comply with Rule 2a-7 of the Investment Company Act of 1940 qualifies for this exception if it is similar in its purpose and design, including the risks that the legal entity was designed to create and pass through to its investors, as compared with a legal entity required to comply with Rule 2a-7.
    2. A reporting entity subject to this scope exception shall disclose any explicit arrangements to provide financial support to legal entities that are required to comply with or operate in accordance with requirements that are similar to those included in Rule 2a-7, as well as any instances of such support provided for the periods presented in the performance statement. For purposes of applying this disclosure requirement, the types of support that should be considered include, but are not limited to, any of the following:
    1. Capital contributions (except pari passu investments)
    2. Standby letters of credit
    3. Guarantees of principal and interest on debt investments held by the legal entity
    4. Agreements to purchase financial assets for amounts greater than fair value (for instance, at amortized cost or par value when the financial assets experience significant credit deterioration)
    5. Waivers of fees, including management fees.
There are four general exceptions to the requirements for consolidating a legal entity. Broadly speaking, the exceptions apply to (1) employee benefit plans, (2) investment companies, (3) governmental entities, and (4) money market funds. If any of these exceptions are applicable, the reporting entity is not required to consolidate the related legal entity under the VIE model or voting interest entity model. As a result, the reporting entity is not required to determine whether the legal entity qualifies for an exception to the application of the VIE model or meets the definition of a VIE. However, as noted above, ASC 810-10 requires a reporting entity to provide certain disclosures when it does not consolidate a legal entity that must comply with or operate in accordance with requirements that are similar to those for registered money market funds included in Rule 2a-7 of the 1940 Act.

Footnotes

3
ASC 946-10-15-6 states, in part:
“An investment company has the following fundamental characteristics:
  1. It is an entity that does both of the following:
    1. Obtains funds from one or more investors and provides the investor(s) with investment management services
    2. Commits to its investor(s) that its business purpose and only substantive activities are investing the funds solely for returns from capital appreciation, investment income, or both.”