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Chapter 8 — Related-Party Considerations

8.2 Identifying Related Parties and De Facto Agents

8.2 Identifying Related Parties and De Facto Agents

ASC 810-10
25-43 For purposes of applying the guidance in the Variable Interest Entities Subsections, unless otherwise specified, the term related parties includes those parties identified in Topic 850 and certain other parties that are acting as de facto agents or de facto principals of the variable interest holder. All of the following are considered to be de facto agents of a reporting entity:
  1. A party that cannot finance its operations without subordinated financial support from the reporting entity, for example, another VIE of which the reporting entity is the primary beneficiary
  2. A party that received its interests as a contribution or a loan from the reporting entity
  3. An officer, employee, or member of the governing board of the reporting entity
  4. A party that has an agreement that it cannot sell, transfer, or encumber its interests in the VIE without the prior approval of the reporting entity. The right of prior approval creates a de facto agency relationship only if that right could constrain the other party’s ability to manage the economic risks or realize the economic rewards from its interests in a VIE through the sale, transfer, or encumbrance of those interests. However, a de facto agency relationship does not exist if both the reporting entity and the party have right of prior approval and the rights are based on mutually agreed terms by willing, independent parties.
    1. Subparagraph superseded by Accounting Standards Update No. 2009-17
    2. Subparagraph superseded by Accounting Standards Update No. 2009-17
  5. A party that has a close business relationship like the relationship between a professional service provider and one of its significant clients.