What is Variable interest entity (VIE)?
In short
A variable interest entity (VIE) is an entity whose equity investors lack enough equity at risk or the usual characteristics of a controlling financial interest. It is consolidated by its primary beneficiary rather than by voting control.
Key takeaways
- The primary beneficiary has both the power to direct the activities that most affect the entity's performance and the obligation to absorb losses or right to receive benefits that could be significant.
- Variable interests include equity, loans, guarantees and certain contracts.
- The assessment is reconsidered when facts change.
Where it's tested
BAR: Business Combinations (Advanced) — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
An entity must consolidate a variable interest entity when it is the primary beneficiary, meaning it has: