Variable Interest Entity (VIE)
Asset-Backed Securities glossary · Regulatory, Syndication & Live Deal Processing
Definition
Under ASC 810, an entity without sufficient equity at risk or without characteristics of a controlling financial interest in its equity holders.
Variable Interest Entity (VIE) in plain English
A Variable Interest Entity is a special kind of company that accounting rules treat as needing a 'parent' to claim it on their books — but the normal test (who owns the most shares?) doesn't work here. That's because a VIE either doesn't have enough of its own real money at stake to stand on its own, or the people who technically own it don't actually call the shots. So instead of asking 'who owns it?', the rules (ASC 810) ask 'who really controls it and absorbs its wins and losses?' — and that party has to report it as if it were their own. It's a bit like a lemonade stand that's 'owned' by a kid but fully funded and directed by a parent: for honesty's sake, the parent is the one who should really be counted as running it.
Also called: VIE
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