Chapter 7 — Determining the Primary Beneficiary

7.4 Related-Party Considerations in the Primary-Beneficiary Assessment

7.4.1 Overview

In performing the primary-beneficiary analysis, a reporting entity must carefully consider related-party relationships. A reporting entity that concludes individually that it has not met both the power criterion (Section 7.2) and the economics criterion (Section 7.3) may still be required to consolidate a VIE as a result of combined interests that it holds with its related parties. In addition, the term “related parties” includes certain other parties that are acting as de facto agents or de facto principals of the reporting entity. Their interests are treated similarly to related-party interests in the performance of the primary-beneficiary portion of the VIE analysis (see Section 8.2 for a discussion of the identification of related parties). Accordingly, it is essential for reporting entities to correctly identify those entities that are related parties and appropriately consider their interests when performing the primary beneficiary assessment.

The discussion below outlines circumstances in which consolidation is required by one of the reporting entities in a related-party group, even if that reporting entity has individually concluded that it has not met both the power criterion and the economics criterion on its own. Note, however, that the related party’s interests should have also been considered in the evaluation of whether a single decision maker, on its own, meets the economics criterion (see Section 7.3.5).

7.4.2 Related-Party Tiebreaker Test and “Substantially All” Characteristic

ASC 810-10

25-44 The guidance in this paragraph shall be applicable for situations in which the conditions in paragraph 810-10-25-44A have been met or when power is shared for a VIE. In situations in which a reporting entity concludes that neither it nor one of its related parties has the characteristics in paragraph 810-10-25-38A but, as a group, the reporting entity and its related parties (including the de facto agents described in paragraph 810-10-25-43) have those characteristics, then the party within the related party group that is most closely associated with the VIE is the primary beneficiary. The determination of which party within the related party group is most closely associated with the VIE requires judgment and shall be based on an analysis of all relevant facts and circumstances, including all of the following:

The existence of a principal-agency relationship between parties within the related party group
The relationship and significance of the activities of the VIE to the various parties within the related party group
A party’s exposure to the variability associated with the anticipated economic performance of the VIE
The design of the VIE.

25-44A In situations in which a single decision maker concludes, after performing the assessment in paragraph 810-10-25-42, that it does not have the characteristics in paragraph 810-10-25-38A, the single decision maker shall apply the guidance in paragraph 810-10-25-44 only when the single decision maker and one or more of its related parties are under common control and, as a group, the single decision maker and those related parties have the characteristics in paragraph 810-10-25-38A.

25-44B This paragraph applies to a related party group that has the characteristics in paragraph 810-10-25-38A only when both of the following criteria are met. This paragraph is not applicable for legal entities that meet the conditions in paragraphs 323-740-15-3 and 323-740-25-1.

The conditions in paragraph 810-10-25-44A are not met by a single decision maker and its related parties.
Substantially all of the activities of the VIE either involve or are conducted on behalf of a single variable interest holder (excluding the single decision maker) in the single decision maker’s related party group.

The single variable interest holder for which substantially all of the activities either involve or are conducted on its behalf would be the primary beneficiary. The evaluation in (b) above should be based on a qualitative assessment of all relevant facts and circumstances. In some cases, when performing that qualitative assessment, quantitative information may be considered. This assessment is consistent with the assessments in paragraphs 810-10-15-14(c)(2) and 810-10-15-17(d)(2).

Pending Content (Transition Guidance: ASC 323-740-65-2)

25-44B This paragraph applies to a related party group that has the characteristics in paragraph 810-10-25-38A only when both criteria (a) and (b) below are met. This paragraph is not applicable for legal entities that meet the conditions in paragraph 323-740-25-1.

The conditions in paragraph 810-10-25-44A are not met by a single decision maker and its related parties.
Substantially all of the activities of the VIE either involve or are conducted on behalf of a single variable interest holder (excluding the single decision maker) in the single decision maker's related party group.

A reporting entity is always required to assess whether it individually meets both characteristics (the power criterion and the economics criterion) of a primary beneficiary after considering the aggregation guidance discussed in Section 7.3.5. If a reporting entity concludes that it does not meet the criteria for a primary beneficiary but that the related-party group (including de facto agents) meets the criteria as a group, the reporting entity may be required to determine which party is most closely associated with the VIE and is required to consolidate the VIE. This determination requires the application of judgment and an evaluation of all relevant facts and circumstances, including the factors listed in ASC 810-10-25-44. Section 7.4.2.1 discusses situations in which a reporting entity is required to perform the related-party tiebreaker test (i.e., the analysis of which party is most closely associated with a VIE), and Section 7.4.2.4 discusses how to perform that test.

In addition, in accordance with ASC 810-10-25-44B, a reporting entity in a single decision maker’s related-party group6 should generally consolidate a VIE if (1) the reporting entity is a related party to a single decision maker that does not, individually, have both characteristics of a controlling financial interest, (2) no other party in the single decision maker’s related-party group individually has both characteristics of a controlling financial interest in the VIE, (3) the single decision maker and its related parties under common control do not have both characteristics of a controlling financial interest, and (4) substantially all of the activities of the VIE either involve or are conducted on behalf of the reporting entity. See Section 7.4.2.5 for a discussion of the “substantially all” characteristic.

The following flowchart illustrates when the related-party tiebreaker test is required and when the “substantially all” characteristic is met:

7.4.2.1 Situations in Which the Related-Party Tiebreaker Test Is Required

Identifying situations in which the related-party tiebreaker test is required is crucial to the consolidation analysis since as a result of the test, one of the entities in the related-party group will always consolidate the VIE. Before the amendments in ASU 2015-02, the related-party tiebreaker test was always required when an individual reporting entity did not have both characteristics of a controlling financial interest but the related-party group collectively did. ASU 2015-02 significantly changed when the related-party tiebreaker test is performed. A reporting entity now performs the test when either of the following applies:

Power is “shared” within a related-party group and the related-party group meets both characteristics of a controlling financial interest. See Section 7.2.8.1 for further discussion of determining whether power is shared.
A single decision maker has met the power criterion but not the economics criterion, and the aggregation of entities under common control with the single decision maker have met the economics criterion (see Section 7.4.2.3). See Section 8.2.2 for further discussion of related parties under common control.

7.4.2.2 Shared Power Within a Related-Party Group

ASC 810-10-25-38D states, in part, that power “is shared if two or more unrelated parties together have the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and if decisions about those activities require the consent of each of the parties sharing power.” Two important points can be inferred from this description: (1) power is only considered shared when all of the activities that most significantly affect the VIE’s economic performance require the consent of the parties sharing power and (2) two or more related parties cannot conclude that neither party should consolidate a VIE because they share power (i.e., the entity’s governance requires that the related parties always have to act in concert with each other to make all significant decisions). Example 7-25 illustrates this concept by highlighting that the related-party group would not be required to perform the tiebreaker test if any party in the related-party group “could” vote together with another related party (without having to obtain the consent of all the related parties) because power is not considered shared. This also applies when the related parties are under common control; however, the substance of the power should be determined. See Section 7.2.9 for further discussion of the substance of power in common-control groups.

If the related-party group shares power and together meets the economics criterion, the party most closely associated with the VIE, as determined by performing the related-party tiebreaker test, will be the primary beneficiary.

Example 7-24

Two related parties, A and B, form a joint venture, Entity Z, that is a VIE. All decisions that most significantly affect Z require the consent of both A and B (i.e., the two parties are not responsible for different activities and do not have unilateral discretion for a portion of an activity).

Power can be shared only among multiple unrelated parties; two or more related parties cannot conclude that power is shared. Since the two venturers in this example are related parties, power cannot be considered shared between them even though they are required to consent to any decisions that are made. Thus, they will need to perform the analysis in ASC 810-10-25-44 (the related-party tiebreaker test) to determine which of them is most closely associated with the VIE and must therefore consolidate the VIE. If A and B were unrelated, neither entity would consolidate the VIE.

Example 7-25

Three related parties (A, B, and C) not under common control form Entity X (a VIE) and hold 25 percent, 35 percent, and 40 percent, respectively, of the entity’s voting interests. Decisions about the activities that most significantly affect the VIE’s economic performance require a simple majority vote of the voting interests. Consequently, two of the three parties must agree on all of the decisions that most significantly affect the VIE’s economic performance. In this example, even though the related-party group holds 100 percent of the voting rights and economics, because X’s corporate governance does not require the consent of all the parties, power is not considered shared. Therefore, performance of the related-party tiebreaker test is not required, and no party will consolidate X.

7.4.2.3 Single Decision Maker and Related Parties Under Common Control

If a single decision maker has met the power criterion but not the economics criterion, and the entities under common control with the single decision maker, in the aggregate, have met the economics criterion, the related-party tiebreaker test must be performed by the parties in the related-party group. In this situation, the purpose of the test would be to determine whether the decision maker or a related party under common control of the decision maker is required to consolidate the VIE. This is a significant change from a reporting entity’s requirements before the adoption of ASU 2015-02, under which the related-party tiebreaker test was required any time a related-party group collectively could exert power over the most significant activities of a VIE and the related-party group met the economics criterion.

Since ASU 2015-02 became effective, two developments have occurred. First, the FASB issued ASU 2016-17, which amended the requirement to consider interests held through related parties under common control as if they were held directly by the decision maker in the primary-beneficiary analysis (see Section 7.3.5.1).

The ASU requires a decision maker to determine the primary beneficiary by considering these interests proportionately in a manner similar to its consideration of indirect interests held through related parties that are not under common control. As a result, there are more situations under ASU 2016-17 that require performance of the related-party tiebreaker test than there were under ASU 2015-02. Since ASU 2016-17 only changes the guidance in ASC 810-10-25-42, it affects the decision maker’s consideration of indirect interests held through related parties under common control only in the primary-beneficiary assessment (i.e., not in the determination of whether the decision maker has a variable interest).

Second, the FASB issued ASU 2018-17, which amended ASC 810-10-55-37D so that indirect interests held by related parties under common control are also only considered on a proportionate basis in the variable interest analysis. Therefore, a decision maker is less likely to be required to apply the VIE model under ASU 2018-17, because fewer fee arrangements would qualify as variable interests.

In addition, we have become aware of diversity in practice related to when a decision maker with contractual power does not have a variable interest but a related party under common control meets the economics criterion. Although it is clear that the parent should generally consolidate the VIE when parties under common control collectively meet both the power and economics criteria, differing views have emerged regarding when, if ever, one of the subsidiaries should consolidate the legal entity in its stand-alone financial statements.

We believe that (1) the decision maker should never be subject to consolidation if it does not have a variable interest (as clarified in an SEC speech — see Section 4.4.2.3.2 — which indicated that a decision maker that determines that its fee is not a variable interest should not be subject to potential consolidation as a result of the performance of the related-party tiebreaker test) and (2) the parent should generally consolidate. However, we do not believe that ASC 810 specifies clearly how a related party under common control with the decision maker (i.e., the non-decision maker) should determine whether it should consolidate in its stand-alone financial statements. Therefore, in the absence of additional clarification from the FASB or SEC staff, we believe that the following views could be appropriate, depending on the reporting entity’s facts and circumstances:

View A — The related-party tiebreaker test should never be performed. In addition, in a manner consistent with the SEC staff speech discussed above, the decision maker should never consolidate since it does not have a variable interest through its fee arrangement. However, if substantially all the activities are on behalf of one of the related parties under common control (other than the decision maker), that party should consolidate in accordance with ASC 810-10-25-44B (see Section 7.4.2.5).
View B — The related-party tiebreaker test should be performed to determine which related party under common control is most closely associated with the VIE. However, if the single decision maker is deemed to be the party most closely associated with the VIE, it would not consolidate in its stand-alone financial statements since doing so would be contrary to the guidance in the SEC speech discussed above, which indicates that a decision maker should not consolidate unless it holds a variable interest in the VIE.

In general, a reporting entity should apply its view consistently as an accounting policy election.

Example 7-26

Entity X and Entity Y are under common control but do not have ownership interests in each other. Entity X is the general partner (decision maker) for Partnership Z but does not own any of the limited partnership interests. Entity Y owns 51 percent of Z’s limited partner interests. The partnership is considered a VIE.

When X and Y each consider only their own respective interests, neither party individually would have both of the characteristics of a controlling financial interest. Entity X would conclude that it does not have a variable interest on its own (and has therefore not satisfied the power criterion) unless (1) the fee arrangement did not meet the commensurate and at-market conditions or (2) Z was designed to circumvent consolidation in the stand-alone financial statement of X or Y. In addition, Y would conclude that it meets the economics criterion but not the power criterion.

Under View A above, because X’s fee arrangement is not considered a variable interest, the related-party tiebreaker test would not need to be performed. Further, unless substantially all the activities are conducted on behalf of Y, neither X nor Y would be required to consolidate Z in its stand-alone financial statements. However, Parent would be required to consolidate Z in its consolidated financial statements because it has met both the power criterion (indirectly through X) and economics criterion (indirectly through Y).

Under View B above, the related-party tiebreaker test would be performed in the assessment of whether Y is the party most closely associated with Z. If Y concludes that X is the party most closely associated with Z, neither X nor Y would be required to consolidate Z in its stand-alone financial statements. However, Parent would be required to consolidate Z in its consolidated financial statements because it has satisfied both the power criterion (indirectly through X) and the economics criterion (indirectly through Y).

7.4.2.4 Performance of the Related-Party Tiebreaker Test

If the reporting entity is required to perform the related-party tiebreaker test, the party identified as most closely associated with the VIE will be the primary beneficiary. A reporting entity must consider all facts and circumstances associated with a VIE in making this determination. No single factor is determinative, and a reporting entity must use significant judgment.

ASC 810-10-25-44 lists four factors for a reporting entity to consider in making the determination. The reporting entity should evaluate (1) each factor individually to identify the extent to which one or more factors point toward a particular party and (2) the factors as a whole to determine which party is most closely associated with the VIE. For any given set of facts and circumstances, the relative weighting of each factor will most likely differ. However, it is important to recognize that the reporting entity’s overall objective is to determine which related party “is most closely associated with the VIE” as a whole; therefore, a comprehensive assessment of the relationship and significance of the activities of the VIE (ASC 810-10-25-44(b)) and the overall design of the VIE (ASC 810-10-25-44(d)) to each of the related parties (not just with respect to the reporting entity making the assessment) is paramount to the reporting entity’s exercise of judgment under ASC 810-10-25-44.

The four factors in ASC 810-10-25-44 are outlined below.

Table 7-1 Factors to Consider When Performing the Related-Party Tiebreaker Test

Factor	Comments
ASC 810-10-25-44(a): “The existence of a principal-agency relationship between parties within the related party group.”	The existence of a principal-agency relationship typically indicates that the principal is most closely associated with a VIE. In assessing the relationship between related parties, the reporting entity should consider (1) whether a de facto agency relationship, as described in ASC 810-10-25-43, exists (this would result in a presumption that there is a principal-agency relationship) and (2) the guidance in ASC 470-50 and ASC 606-10-55-36 through 55-38 to determine whether, by analogy, a principal-agency relationship exists.
ASC 810-10-25-44(b): “The relationship and significance of the activities of the VIE to the various parties within the related party group.”	The analysis should take into account all of the significant activities conducted by the VIE, the extent to which one or both parties have an active role in conducting those activities, and the relative importance of the activities of the VIE to each party. In assessing the importance of the VIE’s activities to each party, the reporting entity should consider factors such as supply arrangements, purchase arrangements, service contracts, leases, and other material contracts.
ASC 810-10-25-44(c): “A party’s exposure to the variability associated with the anticipated economic performance of the VIE.”	It is generally possible to determine qualitatively whether one of the parties in a related-party group has greater exposure to the variability (positive and negative) associated with the VIE’s anticipated economic performance.
ASC 810-10-25-44(d): “The design of the VIE.”	It is important for the reporting entity to contemplate the design of the VIE, including the nature and reasoning behind the formation of the VIE at inception or as of the latest reconsideration date. The reporting entity should consider factors such as the business or economic purpose of the VIE, the role played by each of the parties in the design or redesign of the VIE, the level of ongoing involvement in the VIE’s financial and operating activities and decision making, and the VIE’s capital structure and levels of financial support.

At the 2004 AICPA Conference on Current SEC and PCAOB Developments, an SEC staff member, Associate Chief Accountant Jane Poulin, stated:

It is important to read the words in paragraph 17 [codified as ASC 810-10-25-44] plainly. Paragraph 17 requires an overall assessment of which party is the most closely associated with the entity. When considering questions under paragraph 17, the staff considers all the factors in paragraph 17 and any other factors that may be relevant in making this overall assessment. We do not view paragraph 17 to be a matter of checking the boxes for the four factors listed and adding up who has the most boxes checked. Instead we look at all relevant factors in their entirety considering the facts and circumstances involved. We have also been asked whether any of the factors in paragraph 17 carry more weight than any others or whether any of the factors in paragraph 17 are determinative. There is no general answer to this question. Instead, the facts and circumstances of the situation should be considered to determine whether one factor or another is more important.

Example 7-27

Entity A and Entity B are related parties under common control, and each made an equity investment and share power in VIE X. There are no other variable interest holders or arrangements between A or B and X. Entity A is exposed to the majority of the variability associated with X’s anticipated economic performance.

Neither A nor B individually has the characteristics of a controlling financial interest under ASC 810-10-25-38A. However, through their aggregated variable interests, A and B, as a group, have those characteristics. Assume that in an analysis of the factors in ASC 810-10-25-44(a), (b), and (d), it is not possible to determine which reporting entity is most closely associated with X because there is no apparent principal-agency relationship, the activities of X have roughly equal significance to both A and B, and both parties were equally involved in the design of X.

Given the nature of the transaction, it would be appropriate to weight ASC 810-10-25-44(c) (i.e., a party’s exposure to variability associated with X’s anticipated economic performance) more heavily because no other factor in ASC 810-10-25-44 points toward a particular party. Because A absorbs a majority of the variability associated with X’s anticipated economic performance, it may be reasonable to conclude that A is the primary beneficiary of X.

Note that ASC 810-10-25-44(c) would not be weighted more heavily when one party controls some or all parties in the related-party group since that controlling party has the ability to dictate exposure to the variability associated with the VIE’s anticipated economic performance to the controlled parties.

Example 7-28

Entity A and Entity B are related parties not under common control. They each made equity investments of $40 and $60, respectively, and share power in VIE X. There are no other variable interest holders. At inception, A entered into a supply agreement with X to purchase 100 percent of the output of X at prices initially identified as, and continually adjusted to, fair value. There are no other arrangements between A and B and X. Entity A is exposed to slightly more of the variability associated with X’s anticipated economic performance than is B.

Neither A nor B individually has the characteristics of a controlling financial interest under ASC 810-10-25-38A. However, the aggregate variable interests of A and B, as a group, have those characteristics. In this example, A entered into a contractual arrangement with X to purchase 100 percent of the output of X at prices initially identified as, and continually adjusted to, fair value. The contractual arrangement would be an important consideration in A’s evaluation of the factors associated with the activities (ASC 810-10-25-44(b)) and design of the entity (ASC 810-10-25-44(d)) and, individually, those factors may point toward A as the primary beneficiary. Entity A also has slightly greater exposure to the variability associated with X’s anticipated economic performance.

Although A must also assess B under ASC 810-10-25-44, it may be reasonable to conclude that A should be considered the primary beneficiary on the basis of an evaluation of all the relevant factors, which seem to suggest that A is most closely associated with X.

7.4.2.4.1 Impact of Fees Paid to a Decision Maker or Service Provider in the Related-Party Tiebreaker Test

In the evaluation of whether a reporting entity should consolidate a VIE, fees paid to the reporting entity are excluded from the assessment under ASC 810-10-25-38A(b) if they meet the conditions in ASC 810-10-25-38H (see Section 7.3.4). In addition, fees that met the conditions in ASC 810-10-25-38H would not be considered in the determination of whether the related-party group collectively has the characteristics of a controlling financial interest. Notwithstanding that exclusion for those purposes, if the related-party tiebreaker test must be performed, the fees should be considered in the assessment of which party in the related-party group is most closely associated with the VIE.

Example 7-29

Company A and Company B, which are considered related parties, form a joint venture, Entity C, which was designed to invest in real estate assets for current income and capital appreciation. Entity C is a VIE. Both A and B own 50 percent of the equity interests of C. In addition, A serves as the managing member and property manager of C, and it receives a fee in return for the services provided. The fee arrangement meets the definition of a variable interest in ASC 810-10-55-37 because A has a significant variable interest in C through its equity ownership. Although A is the designated managing member and property manager of C, the decisions about the activities that most significantly affect the economic performance of C require the consent of both A and B; thus, power over the significant activities of C would be considered shared in the absence of a related-party relationship between A and B.

However, A and B cannot be considered to have shared power because they are related parties. As a result, A and B must perform an evaluation to determine which party within the related-party group is most closely associated with C and must therefore consolidate C. That evaluation should take into consideration all the variable interests owned by A and B, including the fee arrangement of A.

Example 7-30

Company X is the general partner of a limited partnership that was designed to invest in equity and debt securities issued by emerging growth companies. Two entities that are under common control with X own 15 percent of the limited partnership interests, and the remaining 85 percent is owned by unrelated limited partners. The partnership is a VIE.

As general partner, X has the power to direct the activities that significantly affect the economic performance of the partnership (i.e., purchasing and selling investments). In return for its services, X receives a fixed management fee that does not meet the economics criterion (and the fee arrangement is not commensurate or at market). Company X does not have any other interests in the partnership or any interests in its related parties under common control.

Company X’s fee arrangement must be evaluated under ASC 810-10-55-37 and is considered a variable interest because the fee arrangement is not commensurate or at market (i.e., does not satisfy ASC 810-10-55-37(a) or 55-37(d)).

While the fee arrangement is considered a variable interest, it does not meet the economics criterion, and none of the limited partnership interests held by X’s related parties under common control would be considered indirectly owned by X, and X does not have any other interests in the partnership. Therefore, X does not individually have a controlling financial interest in the VIE (i.e., it does not meet the economics criterion). However, because the related parties under common control, as a group, meet the power criterion and the economics criterion, they must determine which party in the related-party group is most closely associated with the partnership and must therefore consolidate the partnership. In performing the evaluation, the related parties should consider the design and purpose of the limited partnership, including the fees earned by X.

7.4.2.5 The “Substantially All” Characteristic

A reporting entity in a single decision maker’s related-party group7 is required to consolidate a VIE if (1) the reporting entity is a party that is related to a single decision maker that does not, individually, have both of the characteristics of a controlling financial interest, (2) no other party in the related-party group individually has both characteristics of a controlling financing interest in the VIE, (3) the single decision maker and its related parties under common control do not have both characteristics of a controlling financial interest, and (4) substantially all of the activities of the VIE either involve or are conducted on behalf of the reporting entity. The FASB was concerned that without this provision, a reporting entity would not consolidate an entity that was designed to act on its behalf. The phrase “substantially all” is consistent with the assessments in ASC 810-10-15-14(c)(2) for determining whether an entity is a VIE and whether a reporting entity can apply the business scope exception (see Sections 5.4.2 and 3.4.4.7 for detailed discussions of this phrase).

Example 7-31

An investment manager establishes a fund on behalf of Investor B. The investment manager owns 5 percent of the equity in the fund, and B owns the remaining interests. The investment manager cannot be removed as the decision maker of the fund, and the investment manager cannot sell or liquidate its investment without the consent of B. The fund is considered a VIE. In addition, as a result of B’s one-way transfer restriction, the investment manager and B are considered related parties (de facto agents).

When the investment manager and B each consider only their own respective interests, neither party would be required to consolidate the fund in its stand-alone financial statements. However, B would be required to consolidate the fund because (1) the related-party group possesses the characteristics of a primary beneficiary and (2) given the nature and size of B’s interests in the fund, substantially all of the VIE’s activities are conducted on behalf of B.

Note that the FASB specifically excluded investors in a qualified affordable housing project (QAHP) (e.g., low-income housing tax credit [LIHTC] partnership structures) that is within the scope of ASU 2014-01 from this consolidation requirement. The Board was concerned that as a result of the related-party provision, a single limited partner investor that held more than 90 percent of the limited partner interests in a LIHTC partnership may have otherwise had to consolidate if the general partner was a related party or de facto agent of the investor. Notwithstanding this exception, we note that the determination of “substantially all” is not based solely on economic interests but rather also on the “activities” of the VIE. Therefore, we do not believe that this exception should imply that holding more than 90 percent of the economic interests in a VIE equates to involvement with substantially all of the VIE’s activities. Rather, the reporting entity should consider all facts and circumstances, including the activities of the partnership and active involvement by the general partner in operating the partnership. See Section E.4 for more information about investments in QAHPs.

Changing Lanes

In March 2023, the FASB issued ASU 2023-02, which extends the applicability of the “substantially all” characteristic to all tax equity investments, regardless of the program from which the income tax credits are received, if certain conditions (see Section E.4) are met. Before adoption of the ASU, the exception provided under that characteristic is limited to tax equity investments in a QAHP.

The amendments in ASU 2023-02 are effective for public business entities for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. All other entities must adopt the amendments in ASU 2023-02 for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. For all investors, early adoption, including adoption in an interim period, is permitted. Entities may adopt the amendments by using either a retrospective or modified retrospective approach. See Appendix D of Deloitte’s Roadmap Equity Method Investments and Joint Ventures.

Footnotes

Paragraph BC70 of ASU 2015-02 states, in part, that “if there are no entities under common control that have the characteristics of a primary beneficiary, but substantially all of the activities of the VIE either involve or are conducted on behalf of a single variable interest holder (excluding the decision maker) in the single decision maker’s related party group (and the related party group has the characteristics of the primary beneficiary), the single variable interest holder for whom substantially all of the VIE’s activities either involve or are conducted on its behalf is required to consolidate the VIE as the primary beneficiary” (emphasis added). As a result, a single decision maker must be part of the related-party group for a reporting entity to consolidate a VIE in accordance with ASC 810-10-25-44B.

See footnote 6.

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This publication provides comprehensive guidance; however, it does not address all possible fact patterns, and the guidance is subject to change. Consult a Deloitte & Touche LLP professional regarding your specific issues and questions.