OK, I get why spe’s etc would be consolidated, but I am confused about the usage of the terms. I always miss the questions because I cant get it right. Hopefully I can phrase this question understandably. If you don’t consolidate is it a VIE, SPE? In other words, is VIE or SPE a term for a standalone, and if it has to be consolidated it is not considered a VIE or SPE? Same with QSPE If it doesn’t benefit the sponsor company, the equity holders do have control, etc…is it considered an SPE/VIE/QSPE, but otherwide its not? Do they have to qualify or is the simple act of creating a separate entity deem it a VIE or SPE and they are called that regardless of whether they are consolidated or not? Does one term represent something the others don’t?: I’m pretty sure QSPE is totally separate. Is a VIE the same as an SPE except VIE is GAAP and SPE is IFRS?
Bump
SPE or VIE is just a name. earlier treatment was it was created, would absorb losses, get very minimal gains. were present to help the parent co. that created it in the first place profit from the good, and if anything bad happened - it was the VIE’s fate. (Enron etc. days). now - it must be consolidated on the parent’s books. The name is probably a vestige from days not so long ago, when they did not have to be consolidated. SPE and VIE are just name calling under the different standards. QSPE is no longer even applicable - it is also a relic from the past.
thanks CP, Te meat of my question is, it is called a VIE or SPE regardless of consolidation in otehr words is there going to be a question of “is this or is this not a VIE/SPE” and the answer depends on whether or not the issuing company must consolidate, or is VIE just a name, and it may be a consolidated vie/SPE or a standalone vie/SPE, but its called a vie/SPE regardless?
I thought you could still have a QSPE in certain LIMITED circumstances specific to financial firms… Typically whoever benefits has to consolidate. I wouldnt get caught up in the names dictating or identifying whether or not it is to be consolidated. Safe to say it has to be consolidated by someone.
Right, for some reason, Im stuck thinking that if it is called a VIE or SPE, then that means its a standalone entity, or put another way it has to sort of “qualify” to be called an SPE or VIE, otherwise you don’t even call it that…
There is actually a technical difference between VIEs and SPEs. The universe of entities that are properly called SPEs are a subset of the universe of entities properly called VIEs. This is explained on page 54 of CFAI v. 2; the book explains it as clearly as I can… From a practical (i.e. exam) perspective, I think you are pretty safe just equating the two concepts.
Is this correct: IFRS requires SPE to be consolidated GAAP does not require SPE to be consolidated there is no such thing (anymore) as a qualified SPE ? what do you think?
I don’t think so, if I remember correctly, IFRS requires SPE to be consolidated, US GAAP also requires VIE to be consolidated. So if we are equating the 2, I guess both standards require consolidation? Correct me if I am wrong.
That is right. After Enron no one is taking chances!
This right from the textbook page 76, #18 IFRS: spe must be consolidated and under IFRS cannot be classified as qualifying GAAP: qualifying SPE’s do not have to be qualifying