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FASB Issues Additional Guidance on FIN 46
On July 23, 2003, the Financial Accounting Standards Board (FASB) approved the issuance of five FASB Staff Positions (FSPs) providing guidance on the application of FASB Interpretation No. 46, Consolidation of Variable Interest Entities. (An FSP is the means by which the FASB staff communicates its views on the proper application of FASB literature when it believes there is only one acceptable interpretation. Prior to February 2003, FASB staff guidance was communicated through Staff Implementation Guides or announcements at meetings of the FASB's Emerging Issues Task Force.) The FSPs issued by the staff include:
- FIN 46-1, “Applicability of FASB Interpretation No. 46, Consolidation of Variable Interest Entities, to Entities Subject to the AICPA Audit and Accounting Guide, Health Care Organizations”
- FIN 46-2, “Reporting Variable Interests in Specified Assets of Variable Interest Entities as Separate Variable Interest Entities under Paragraph 13 of FASB Interpretation No. 46, Consolidation of Variable Interest Entities”
- FIN 46-3, “Application of Paragraph 5 of FASB Interpretation No. 46, Consolidation of Variable Interest Entities, When Variable Interests in Specified Assets of a Variable Interest Entity Are Not Considered Interests in the Entity under Paragraph 12 of Interpretation 46″
- FIN 46-4, “Transition Requirements for Initial Application of FASB Interpretation No. 46, Consolidation of Variable Interest Entities”
- FIN 46-5, “Calculation of Expected Losses under FASB Interpretation No. 46, Consolidation of Variable Interest Entities.”
The FASB staff has also proposed FSPs on: 1) the treatment of fees paid to decision makers and guarantors in determining expected losses and expected residual returns and 2) the impact of rights to remove a decision maker on the computation of expected residual returns, but has not finalized that guidance.
A brief explanation of each of the final FSPs and their impact on FIN 46 follows.
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