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SEC Cautions Companies on Consolidation Analyses

Tammy Whitehouse | December 17, 2014

The Securities and Exchange Commission is taking a closer look at who consolidates a variable interest entity, noticing some differences in how companies apply existing guidance and offering views to help make reporting more consistent.

Christopher Rogers, professional accounting fellow at the SEC, told a national conference of the American Institute of Certified Public Accountants recently that the staff has noticed several practice issues with respect to the consolidation guidance in Accounting Standards Codification Topic 810, especially around the application of shared power, determining when a decision maker is acting in an agency capacity, and how to consider power and economics when related parties are under common control.

With respect to shared power, Rogers said existing guidance provides that no one party would consolidate a VIE when the power to direct significant activities is truly shared by multiple...

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