Back On-Balance Sheet: Observations From The Adoption Of FAS 167
With the ink not yet dry on first quarter 2010 SEC filings, it's a good time to reflect on an accounting change effective for this year that has received significant attention since its issuance in June2009.Of course, We are speaking of FABS Interpretation NO.46(R)(subsequently codified in the FAB'S accounting Standards Codification as ASU 2009-17, Improvement to Financial Reporting by Enterprises Involved With Variable Interest Entities).This publication covers some observations on considerations and challenges companies have faced during their initial adoption, including a brief summary of the impact that ASU 2009-17 has had on a sample of 40 SEC registrants across different industry sectors.ASU 2009-17 focuses on the analysis of which variable interest holder would be identified as the primary beneficiary, and thus consolidator, of a Variable Interest Entity (VIE). Previously, the consolidation conclusion centered on the identification of the party that absorbs a majority of the expected losses or receives a majority of the expected residual returns of the VIE. Under the revised consolidation guidance, the consolidation conclusion centers on the identification of the party that has both (1) the power to direct the activities that most significantly impact the VIE's economics, and (2) the right to receive benefit or the obligation to absorb losses that could potentially be significant to the VIE. The ASU also requires a continual reassessment of which party is the primary beneficiary.