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Let us first start by explaining what a variable interest entity ("VIE") is. A VIE is a legal entity that is subject to consolidation. Generally, these entities are usually designed to support another entity; but this may not always be the case.
A reporting entity would have to assess if they are the primary beneficiary of the VIE and if they are then the reporting entity would consolidate the VIE. Below are the two criteria that would need to occur in order for the reporting entity to be considered the primary beneficiary which would result the reporting entity consolidating the VIE. If the reporting entity meets both criteria it would then need to consolidate the VIE.