Is it required that the SPV consolidate results within its financial statemenets?
I am considering the formation of a SPV for the purposes of executing a contract to manage and operate (but not take any equity share in) another entity ("Entity X"). This SPV is a 50-50 joint venture. My question: as the SPV is a variable interest entity, is it necessary for the shareholders of the SPV to consolidate the results of Entity X within their financial statements?
Is it required that the SPV consolidate Entity X results within its financial statements?
Factual circumstances invite multiple presumptions:
- SPV* “management” entity (SPV is Corp, SCorp LLC, LLP, LLLP, LP, Trust or Business Trust?)
- SPV Mngt. Co. owns 0% of Entity X (disregarded entity rules avoided)
- "variable interest entity"? Transferable shares of J.V. _______________ (describe entity type)
- SPV Mngt. Co. contracts with Entity X, at “arms length”, for management services valued at comparable FMV
- Equity owner(s) (Indiv/Corp/Prtnr/Trust) of SPV are, domestic and not related or subject to attribution rules
- Business of SPV is not subject to personal holding company or professional services entity classification.
- SPV and Entity X interests not subject to federal or state SEC regulations
SPV’s primary source of income is active business operations (ex.: nonreal estate or investment mngt.)
Preliminary Conclusion: SPV not subject to IRC consolidation reg.s.
*SPV; Special Purpose Vehicle, accounting industry term for infamous (ex.: Hedge Funds) with a dubious reputation.
Last edited by Helse; 03-13-2009 at 09:51 AM.
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