The term VIE structure is very popular these days, so what is the VIE structure?
Today Xiaobian to introduce you about the VIE structure!
The VIE model (Variable Interest Entities), namely the VIE structure, is known as “agreement control” in China. It refers to the separation of overseas registered listed Entities and domestic business operating Entities. The overseas listed Entities control domestic business Entities through agreements.
Business entities are VIEs(variable interest entities) of listed entities.
VIE is a new concept that emerged after the Enron scandal in 2001.
Before Enron, consolidated statements were required only when one company had a majority of voting rights over another.
After Enron, consolidated statements were required as long as the entity met the VIE criteria.
After Enron incident, the United States Financial Accounting Standards Board issued FIN46.
According to FIN46, any SPE that meets any of the following three conditions shall be considered a VIE and its profit and loss status shall be incorporated into the balance sheet of the “primary beneficiary” :(1) there is little risk, the entity (company) is mainly backed by outside investment, and the shareholders of the entity itself have very few voting rights;
(2) the shareholders of the entity (company) cannot control the company;
(3) The share of voting rights enjoyed by shareholders is not proportional to the share of interests enjoyed by shareholders.