Variable Interest Entity - VIE
Definition of 'Variable Interest Entity - VIE'An entity (investee) in which the investor has obtained less than a majority-owned interest, according to the United States Financial Accounting Standards Board. A variable interest entity (VIE) is subject to consolidation if certain conditions exist.If a firm is the primary beneficiary of a VIE, the holdings must be disclosed on the balance sheet. The primary beneficiary is defined as the person or company with the majority of variable interests. Also known as a conduit. |
|
Investopedia explains 'Variable Interest Entity - VIE'VIEs are commonly used within financial firms for their subprime mortgage-backed securities. They can be a special-purpose vehicle (SPV) that allows firms to keep assets off of their balance sheets. A VIE refers to the way a firm's exposure to the SPV can change. This is the key to whether or not it can be excluded from the balance sheet.A corporation can use such a vehicle to finance an investment without putting the entire firm at risk. The problem, as with SPVs in the past, is that they have become a method of hiding things (such as subprime exposure). |
Related Definitions
Articles Of Interest
-
Subprime Is Often Subpar
Proceed with caution when considering these short-term, high-interest mortgages. -
The Fuel That Fed The Subprime Meltdown
Take a look at the factors that caused this market to flare up and burn out. -
Fatal Seduction Of The Municipal Bond Insurers
Learn how a foray into CDOs and other exotic products ruined an industry's image. -
What is a liquidity squeeze?
A liquidity squeeze occurs when a financial event sparks concerns among financial institutions (such as banks) regarding the short-term availability of money. These concerns may cause banks to ... -
What is happening during a risk repricing?
During a strong bull market, the market's overall sense of optimism can often lead to poor estimates about the level of risk that an investment may possess. Unfortunately, once a market correction ... -
What is a subprime mortgage?
A subprime mortgage is a type of loan granted to individuals with poor credit histories (often below 600), who, as a result of their deficient credit ratings, would not be able to qualify for ... -
6 Asset Allocation Strategies That Work
Your portfolio's asset mix is a key factor in whether it's profitable. Find out how to get this delicate balance right. -
Pay Attention To The Proxy Statement
Don't overlook this overview of a company's well-being. -
How Risk Free Is The Risk-Free Rate Of Return?
This rate is rarely questioned - unless the economy falls into disarray. -
Top 4 Most Scandalous Insider Trading Debacles
Here we look at some of the landmark incidents of insider trading.
Free Annual Reports