Comment: Update on improvements to related party guidance for VIEs

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Grant Thornton has submitted a comment letter to the FASB on its proposed Update on Targeted Improvements to Related Party Guidance for Variable Interest Entities (VIEs). There are three primary changes in this proposal.

  1. An option to allow private companies to not apply VIE guidance and instead rely only on a voting interest model for consolidation analysis
  2. Make the GAAP guidance consistent between indirect interests held through related parties under common control and indirect interest held through related parties not under common control. 
  3. Eliminate the mandatory consolidation for situations in which power is shared among related parties or when commonly controlled related parties, as a group, have the characteristics of a controlling financial interest but no reporting entity individually has a controlling financial interest and propose a different analysis model for such circumstances.
We agree with the first two amendments and believe that the third amendment may not result in any improvements over current GAAP. We believe the third proposal should be based on a clearly laid out principle, and we have suggested one.

Read the letter.