By Denise LugoThe Financial Accounting Standards Board issued new accounting rules to provide guidance—to users and preparers of financial statements—on whether they must consolidate certain legal entities, such as limited partnerships, limited liability corporations and securitization structures.FASB on Feb. 18 issued Accounting Standards Update, ASU No. 2015-02, Consolidation (Topic ASC 810): Amendments to the Consolidation Analysis, to address concerns that current guidance doesn't provide sufficiently useful information for investors and other financial statement users.Some companies organize their corporate activity by using legal vehicles such as limited partnerships or limited liability companies because of the advantages they can provide. The new rules are important because they'll simplify consolidation accounting, thus enabling financial statement users to better analyze the reporting company's economic and operational results.The guidance refines the criteria for judging when entities should be consolidated for reporting purpose, FASB said in a FASB in Focus explanation. The number of consolidation models is reduced from four to two.“This new standard simplifies consolidation accounting by reducing the number of consolidation models, providing incremental benefits to stakeholders. For example, specialized guidance for legal entities will be eliminated by removing the indefinite deferral for certain investment funds, and certain money market funds will no longer have to apply the guidance,” FASB Chairman Russell Golden said.The guidance is applicable to periods beginning after Dec. 15, 2015 for public companies, but permits early adoption, the FASB ASU states. For private companies, it's effective after Dec. 15, 2016 and interim periods within fiscal years after Dec. 15, 2017.Stresses on Risk of Loss The new guidance places more emphasis on risk of loss when determining a controlling financial interest, said FASB.Furthermore, it is expected to reduce the frequencies of the application of related party guidance when determining a controlling financial interest in a variable interest entity (VIE).For companies that employ limited partnerships for VIEs it might change consolidation conclusions, said FASB. The board highlighted a number of industries that could be impacted including investment management, banking, insurance and life sciences.Some money market funds will no longer fall within the boundaries...