Company consolidating general interest investment partnership
If it is, then the VIE consolidation model applies.
If it is not, then the VOE consolidation model applies with the presumption that the general partner controls the partnership and therefore must consolidate.
The VIE model applies when voting interests are not indicative of control.
Under this model control is defined based on having power over the decision-making activities and economic exposure, through variable interests.
Although all of this is generally good news for general partners, there is a bit of bad news too.
Extensive disclosures are required if an entity holds variable interests in VIEs, irrespective of whether the entity has to consolidate the VIE.
The consolidation guidance is complicated and includes specific terminology and intricate rules. Over time, the consolidation guidance has evolved to prevent abuses and it is still evolving. A good understanding of the rules and recent changes is paramount.