Consolidation Checklist

Does the reporting entity have variable interest in a legal entity?

Does the NewCo not have enough equity to finance its activities without additional subordinated financial support?

Do the equity holders, as a group, lack characteristics of controlling financial interest?

Is the NewCo structured with non-substantive voting rights?

Does the reporting entity, individually, have the characteristics of the primary beneficiary?

Characteristics of a primary beneficiary include the primary party who is obligated to absorb losses or right to receive the most benefits of the entity of the entity and the majority of the power to direct the activities of entity that most significantly impact the entity’s economic performance.

Primary Beneficiary Indicators:

• Determining or changing operating and financing policies;
• Managing the operations of the NewCo;
• Providing or securing the provision of supplies and services;
• Developing and maintaining policies and procedures;
• Selling and purchasing goods and/or services;
• Managing financial assets during their life (and/or upon default);
• Selecting, acquiring or disposing of assets;
• Determining a funding structure or obtaining funding;
• Preparation and approval of a business plan and budget; and
• Appointing, remunerating or terminating the employment of key personnel.

If the power to direct the activities of NewCo that most significantly impact the NewCo’s economic performance is shared among unrelated parties, does the group have characteristics of a primary beneficiary?

If so, apply the “Most Closely Associated” Test:

1. The existence of a principal-agency relationship between parties within the related party group
2. The relationship and significance of the activities of th VIE to the various parties within the related party group
3. A party’s exposure to the variability associated with the anticipated economic performance of the VIE
4. The design of the VIE

Is the reporting entity a single decisions maker and has the obligation to absorb losses or right to receive benefits either with direct interest or indirect interest?

Characteristics of a single decision maker include having the ability through voting rights or similar rights to make the decisions about the activities that most significantly impact the entity’s economic performance.

Does the single decision maker, as a group with its related parties meet the following:

• Reporting entity and their related parties hold characteristic of the primary beneficiary
• Reporting entity and their related parties are under common control
• Substantially all of the NewCo’s activities involve or are conducted on behalf of the reporting entity or its related parties

Are the decision maker and its related party or parties under common control? Apply the “Most Closely Associated” Test as described above.