Consolidation has commonly been limited to circumstances where an entity has a majority voting interest in another. FIN 46(R), however, describes relationships where an entity may have a controlling financial interest in another with little or no equity or voting interest. A reporting entity can apply FIN 46(R) by asking three questions: 1. Is the relationship exempt? 2. Does the potential variable interest entity have characteristics of a VIE? 3. Does the reporting entity have a controlling financial interest? If the answer is yes to all three, the PVIE is a VIE and the reporting entity must prepare consolidated financial statements. Whether the PVIE has characteristics of a VIE and whether the reporting entity has a controlling financial interest is determined when the relationship is established. A PVIE has the characteristics of a VIE if any of three conditions exist: 1. The equity at risk is not sufficient. 2. At-risk equity investors lack one or more of the characteristics of a controlling financial interest. 3. Other factors indicate that equity holders lack a controlling financial interest.