What is an ASC 810?

ASC 810 is an accounting standard that provides guidance for companies with multiple entities to remain compliant when consolidating their financials.

How do you determine if a legal entity is a VIE?

Essentially, VIE is a legal entity (an important scope criteria) a) that has insufficient at-risk equity to fund its activities without additional subordinated financial support from any other party or parties, b) whose at-risk equity holders as a group do not have the power through voting or similar rights to direct …

What are the two characteristics GAAP requires to be met both must be met to determine the primary beneficiary?

46(R)), a primary beneficiary of a VIE has both of the following characteristics: (a) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive …

How do you determine if an entity is a variable interest entity?

Characteristics

The entity does not have enough equity to finance its activities without additional subordinated financial support (e.g., the entity is thinly capitalized)
The equity holders, as a group, lack any one of the common characteristics of a controlling financial interest:

What are kick out rights?

Kick-out rights refer to the limited partners’ ability to dissolve the partnership or otherwise remove the general partner without cause. If substantive participating rights are present in a limited partnership, the presumption of control by the general partner is overcome.

Are VIEs legal?

A variable interest entity (VIE) refers to a legal business structure in which an investor has a controlling interest despite not having a majority of voting rights. Investors in VIEs do not participate in residual gains or losses.

Is Baba ADR a VIE?

The company’s status as a Variable Interest Entity (VIE). If you buy BABA on the New York Stock Exchange, you are buying ADRs that in turn have a claim on the Alibaba VIE. If you buy Alibaba as ‘9988’ on the Hong Kong Stock Exchange, you own a stake in the VIE directly.

Can you consolidate companies with different year ends?

The parent company must consolidate all financial statements, including those of its subsidiary companies. If the subsidiary companies use different fiscal years from that of the parent company, then they must be adjusted to the parent company’s fiscal year.

When should you consolidate financial statements?

Consolidated financial statements are used when the parent company holds a majority stake by controlling more than 50% of the subsidiary business. Parent companies that hold more than 20% qualify to use consolidated accounting. If a parent company holds less than a 20% stake, it must use equity method accounting.

Are VIEs legal in China?

The VIE structure is illegal under Chinese law The contracts pertaining to control of the assets and the rights to the profits are legally unenforceable. The reason is that any right of the VIE to profits of the Chinese company rest on the contracts it has with the real Chinese company.

What is contingent no kick out?

“Contingent with no kick-out” is one of those real estate clauses that can be attached to a buyer’s offer on a house. Like “active” or “sale pending status,” a house marked with this clause can give buyers a sense of whether or not the house has received an offer and how close sellers might be to closing the deal.