Consolidation of SPE

How does consolidation of SPE result in higher Sales? I know that Assets and Liabilities will be higher but SALES?

Yes, if the SPE generates sales. I haven’t seen the CFAI use an SPE in this context, though.

I suppose sales, expenses (if there are any) would also be high then?

Does’nt it depend on how the SPE/VIE is set up? I mean some SPE is set up where the the shareholders absorb all the gains…but some are set up where the VIE holders absorb all the losses… I read this somewhere…so basically it depends on how the contract was set up? no?

kelly, from FASB, It could be both losses and gains or both. The key word is how majority of the entity’s residual returns are shared. “Interpretation 46 … requiring a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities OR entitled to receive a majority of the entity’s residual returns or both. A company that consolidates a variable interest entity is called the primary beneficiary of that entity.”