Variable interest entity

A variable interest entity (VIE) is a legal structure defined by the Financial Accounting Standards Board (FASB) for situations where control over a legal entity may be demonstrated through means other than voting rights. A public company with a financial interest in such entities may be subject to certain financial reporting requirements.

VIEs gained notoriety in the early 2000's due to their role in the Enron scandal, where the company used special-purpose entities to hide mounting losses from investors.[1][2] VIEs have also been employed by Chinese companies, such as Alibaba, to circumvent Chinese government regulations that restrict foreign ownership of certain assets and industries, thus gaining access to foreign capital.[1]

VIEs have faced criticism for their lack of transparency and limited rights provided to foreign investors, with some experts calling for the banning of future listings and delisting of existing Chinese companies using VIEs.[3]

  1. ^ a b Cite error: The named reference ft.c_Tell was invoked but never defined (see the help page).
  2. ^ Gillis, Paul L.; Oqvist, Fredrik (13 March 2019). "Variable Interest Entities in China" (PDF). GMT Research. Retrieved 17 December 2021.
  3. ^ Cite error: The named reference wsj._Opinion was invoked but never defined (see the help page).