FASB Endorses VIE Alternative for Lease Arrangements

FASB has voted to endorse a GAAP alternative to exempt private company lessees from a requirement to consolidate variable interest entities (VIE) in common control leasing arrangements.  Initiated by the Private Company Council (PCC), the exemption would be allowed under specific conditions including:

• Private company lessee and the lessor entity are under common control
• Private company holds a leasing arrangement with the lessor entity
• All activity between entities is substantially related to the leasing activity between the lessor and private company
• Obligations of the lessor that are being guaranteed or collateralized by the private company could, at the inception of the obligation, be sufficiently collateralized by the asset(s) leased to the private company.

For more information on the exemption including how VIE disclosures will be replaced with new disclosures regarding the lessor entity, visit the Journal of Accountancy.