Never quite got a hold of these. They are formed by companies for certain reasons IAS requires consolidation if its controlled by the reporting entity. GAAP says that if the SPE is classified as a VIE it has to be consolidated by the primary beneficiary Anyone care to explain how they understand them?
Wow, there’s a lot more than that to learn about these. GAAP calls them VIE’s, while IFRS calls them SPE’s. There was such a thing as a QSPE, recognized by GAAP, but that is irrelevant this year. Consolidate an SPE (IFRS) if the sponsor receives a benefit, has an obligation to absorb losses, or holds a residual interest. Consolidate a VIE (GAAP) if the total at risk equity is insufficient to fund operations or equity investors lack one of the following: voting rights, obligation to absorb losses, or right to a return. You’re not done yet: GAAP considers only the number of shares outstanding when considering voting rights; IFRS considers not only that but also the number of securities with potential voting rights (i.e. warrants).