VARIABLE INTEREST ENTITIES AND EQUITY INVESTMENTS

Variable Interest Entities

Variable Interest Entities (VIEs) are less than fully-owned entities that are consolidated in the financial statements. Accordingly, consolidated  pretax income will include all of the pretax income or loss associated with the VIE,  while income tax expense will only include the amount of tax that associated with the Company’s ownership of the VIE. The income associated with the non-controlling interest is reported on a separate line of the income statement net of the income tax effect. 

 

VIEs are often partnerships or other flow-through entities that do not pay tax at the entity level. Deferred taxes are recorded on any outside basis differences for partnerships.

Equity in Earnings

Investments in certain non-consolidated entities are recorded in equity in earnings net of any income tax impact.

 

Any dividends received deductions available to a U.S. shareholder should be taken into account when determining the tax impact of equity in earnings.