If Entity A will absorb a majority of a VIE's expected losses and Entity B will receive a majority of that VIE's expected residual returns, both entities must consolidate the VIE.

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Under U.S. GAAP, the entity that has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE is required to consolidate the VIE. This means only one entity (either Entity A or Entity B, but not both) would consolidate the VIE based on these criteria.

If Entity a Will Absorb a Majority of a VIE's