SPV and Transaction Parties
Definition
Variable Interest Entity (VIE)
Under US GAAP (ASC 810): an entity where the controlling party is determined by economic exposure to variable returns rather than voting rights. If the originator is the primary beneficiary, it must consolidate the SPV despite legal transfer of assets.
Deep Dives
Related Terms
Special Purpose Vehicle (SPV)
A bankruptcy-remote legal entity created solely to hold assets and issue securities or borrow against those assets. Bankruptcy-remoteness is the defining feature — achieved through limited purpose charter, limited recourse provisions, and non-consolidation opinions.
True Sale
A transfer of assets constituting a legal sale (not a secured loan) so that the assets are excluded from the originator's insolvency estate. Requires: (1) intent of parties; (2) no obligation to repurchase at par; (3) no practical control retained; (4) supported by a true sale legal opinion. See also: VIE/ASC 810 for US GAAP consolidation consequences.