For all other entities, the guidance is effective for annual periods beginning after December 15, 2016, and interim periods beginning after December 15, 2017.
In summary, general partners most likely will no longer need to consolidate limited partnerships.
Even if a limited partnership were a VIE, the general partner most likely would be considered the primary beneficiary and be required to consolidate the limited partnership.
This is because the general partner most likely would have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and, although small, probably also has a variable interest.
Many general partners are not happy about consolidating limited partnerships. Many believe they are merely acting on behalf of the limited partners.
Furthermore, they argue that generally they have a limited economic interest in the partnership. However, this is actually good news for general partners.
In general, an entity is required to consolidate if it has a controlling financial interest in another entity.
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.
Since general partners generally hold variable interests in limited partners, these additional disclosure requirements would apply if the limited partnerships are considered VIEs.
The changes to ASC 810 as a result of ASU 2015-02 are effective for public entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2015, so beginning January 1, 2016 for calendar-year entities.