Variable Interest Entity

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A Variable Interest Entity (VIE) is a term used by the United States Financial Accounting Standards Board in FIN 46 to refer to an entity (the investee) in which the investor holds a controlling interest which is not based on the majority of voting rights. It is closely related to the concept Special Purpose Entity. The importance of identifying a VIE is that companies need to consolidate such entities if it is the primary beneficiary of the VIE.

[edit] Criteria

A VIE is an entity meeting one of the following three criteria as elaborated in paragraph 5 of FIN46:

The equity-at-risk is not sufficient to support the entity's activities (e.g.: the entity is thinly capitalized, the group of equity holders possess no substantive voting rights, etc.);
As a group, the equity-at-risk holders cannot control the entity; or
The economics do not coincide with the voting interests (commonly known as the "anti-abuse rule").