On December 4, 2009, the Financial Accounting Standards Board (FASB) issued proposed guidance to allow certain entities that manage the assets of investment funds, including mutual, private equity and hedge funds, to avoid having to consolidate the assets and liabilities of such entities on their balance sheets under new consolidation rules that go into effect in January 2010.  The draft guidance, issued as an Accounting Standards Update (ASU) and entitled “Amendments to Statement 167 for Certain Investment Funds,” would affect the use of Accounting Standards Codification Topic 810 (formerly FASB No. 167, amending FASB Interpretation 46(R)).  As currently written, Accounting Statement 167 – which requires nonpublic companies to publicly disclose their interests in variable interest entities in a similar manner to public entities – may result in investment managers consolidating in their financial statements the assets and liabilities of many hedge funds, private equity funds and other investment funds that they manage.  The draft ASU would defer its application for investment managers’ interests that meet certain criteria.  This article details those criteria, the proposed amendments and the implications for hedge fund managers of the proposed guidance.