The equity investment at risk and expected losses of a silo that is separately consolidatable as a VIE should be excluded from the equity at risk and expected losses of the legal entity as a whole. In this situation, none of the expected losses or benefits of the silo inure to any other variable interest holders of the legal entity, and none of the specified liabilities are payable from the residual assets attributable to the other variable interests of the entity.
At this point in the VIE model analysis, the silo needs to be separated from the overall entity. If the silo is 1) a VIE and 2) has a primary beneficiary, then the silo is potentially consolidated separately from the legal entity. Since a silo can only be consolidated separately as a VIE as long as the legal entity is also a VIE, the evaluation process is as follows:
- Determine if there is a silo;
- Subtract the equity investment at risk and the expected losses of the silo from those of the overall legal entity;
- Evaluate the overall legal entity without the silo;
- If the overall legal entity without the silo is not a VIE, then the overall legal entity, including the silo, should be evaluated under the voting interest model.
- If the overall legal entity without the silo is a VIE, then evaluate the silo as a stand-alone entity;
- If the silo is a VIE, the silo should be consolidated by its primary beneficiary if it has one, even if the legal entity does not have a primary beneficiary.
Thus it is possible for the silo VIE and an overall legal entity VIE to be consolidated or not separately and apart from each other as if they are two different entities.