Impact of Revised Consolidation Guidance on LP Investments in LIHTC
In February 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. The amendments make targeted changes to the current consolidation guidance and are effective in 2016 for public business entities, including interim periods. All other entities have an additional year for transition—for fiscal years beginning after December 15, 2016, and for interim periods beginning after December 15, 2017.
The ASU modifies the evaluation of whether limited partnerships (LP) and similar legal entities are variable interest entities (VIE) or voting interest entities (VOE). The ASU eliminates both the consolidation model specific to LPs and the current presumption that a general partner controls LPs that are not VIEs. These changes are not limited to a particular industry; all reporting entities with a variable interest in other legal entities will need to re-evaluate their consolidation conclusions and potentially revise their disclosures, including investments in low‐income housing tax credits (LIHTC).
In many cases, the consolidation conclusion may not change as a result of this ASU. However, public business entities will need to update and document their new analysis and conclusions in 2016. All other entities have until 2017 to adopt the new standard.