AIG 2013 Annual Report Download - page 288

A variable interest entity (VIE) is a legal entity that does not have sufficient equity at risk to finance its activities
without additional subordinated financial support or is structured such that equity investors lack the ability to make
significant decisions relating to the entity’s operations through voting rights or do not substantively participate in the
gains and losses of the entity. Consolidation of a VIE by its primary beneficiary is not based on majority voting
interest, but is based on other criteria discussed below.
We enter into various arrangements with VIEs in the normal course of business and consolidate the VIE when we
determine we are the primary beneficiary. This analysis includes a review of the VIE’s capital structure, contractual
relationships and terms, nature of the VIE’s operations and purpose, nature of the VIE’s interests issued and our
involvement with the entity. When assessing the need to consolidate a VIE, we evaluate the design of the VIE as
well as the related risks the entity was designed to expose the variable interest holders to.
For VIEs with attributes consistent with that of an investment company or a money market fund, the primary
beneficiary is the party or group of related parties that absorbs a majority of the expected losses of the VIE, receives
the majority of the expected residual returns of the VIE, or both.
For all other VIEs, the primary beneficiary is the entity that has both (1) the power to direct the activities of the VIE
that most significantly affect the entity’s economic performance and (2) the obligation to absorb losses or the right to
receive benefits that could be potentially significant to the VIE. While also considering these factors, the consolidation
conclusion depends on the breadth of our decision-making ability and our ability to influence activities that
significantly affect the economic performance of the VIE.
10. VARIABLE INTEREST ENTITIES
..................................................................................................................................................................................................................................
AIG 2013 Form 10-K270
ITEM 8 / NOTE 10. VARIABLE INTEREST ENTITIES
..................................................................................................................................................................................
............................................................................................................................................................................................