(3)	Consolidation of Variable Interest Entities as a Non-Controlling Interest

The Company regularly performs a review of its container fund arrangements with investors to determine whether a fund is a variable interest entity (VIE) and whether the Company has a variable interest that provides it with a controlling financial interest and is the primary beneficiary of the VIE in accordance with ASC 810, Consolidation. If the fund is determined to be a VIE, a further analysis is performed to determine if the Company is a primary beneficiary of the VIE and meets both of the following criteria under Paragraph 14A of ASC 810:

·	It has power to direct the activities of a VIE that most significantly impact the entity's economic performance; and

·	It has the obligation to absorb losses of the entity that could be potentially significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE.

If in the Company's judgment both of the above criteria are met, the VIE's financial statements are included in the Company's consolidated financial statements as required under ASC 810. The equity attributable to the VIE is shown as a non-controlling interest on the Company's consolidated balance sheet and the after tax result attributable to its operations is shown as a net income or loss attributable to non-controlling interest on the Company's consolidated statement of income.

The Company currently enters into two types of container fund arrangements with investors which are reviewed for under ASC 810. These arrangements include container funds that the Company manages for investors and container funds that the Company has entered into financing arrangements with investors. Included among several of the funds that the Company manages, and all of the funds under financing arrangements, are Japanese container funds that were established by a related party under separate investment agreements allowed under Japanese commercial laws (see Note 11). Each of the funds is financed by unrelated Japanese third party investors.

Managed Container Funds

All container funds under management by the Company are considered VIEs because as manager of the funds, the Company has the power to direct the activities that most significantly impact the entity's economic performance including the leasing and managing the containers owned by the funds. With the exception of two specific Japanese funds established in September 2010, the fees earned for arranging, managing and establishing the funds are not significant to the expected returns of the funds so the Company does not have a variable interest in the funds. The rights to receive benefits and obligations to absorb losses that could potentially be significant to the funds belong to the third party investors, so the Company concluded that it is not the primary beneficiary of the funds. With the exception of the sale of containers to the two Japanese funds established in September 2010, the Company recognizes gain on sale of containers to the unconsolidated VIEs as sales in the ordinary course of the business. No containers were sold to the Japanese VIEs during the three months ended June 30, 2012. For the six months ended June 30, 2012 the Company sold $10.3 million of container portfolios to the Japanese VIEs and recognized gains of $1.3 million. For the three and six months ended June 30, 2011, the Company sold $4.3 million and $12.6 million, respectively, of container portfolios and recognized gains on sale of $0.3 million and $1.7 million, respectively.

In September 2010, the Company transferred approximately $16.0 million of containers to two specific Japanese funds that are considered VIEs. The terms of the transaction included options for the Company to purchase the containers from the funds at a fixed price. As a result of the residual interest resulting from the fixed price call option, the Company concluded that it may absorb a significant amount of the variability associated with the funds' anticipated economic performance and as a result the Company has a variable interest in the funds. As the Company has the power to direct the activities that most significantly impact the economic performance of the VIEs and the variable interest provides the Company with the right to receive benefits from the entity that could potentially be significant to the funds, the Company determined that it is the primary beneficiary of these two specific VIEs and included the VIEs' assets and liabilities as of June 30, 2012 and December 31, 2011, the results of the VIEs' operations for the three and six months ended June 30, 2012 and 2011, and the cash flows of the VIEs for the six months ended June 30, 2012 and 2011 in the Company's consolidated financial statements.

The containers transferred to the two consolidated Japanese VIEs had a net book value of $13.6 million as of June 30, 2012. The container equipment, along with $3.3 million of cash held by these container funds and $1.6 million of net investment in direct finance leases, have been included on the Company's consolidated balance sheet with the offsetting equity related to the funds presented separately as non-controlling interest of $19.3 million in the equity section of the Company's consolidated balance sheet as of June 30, 2012. No gain or loss was recognized upon the initial consolidation of the VIEs in September 2010. The net income of $0.5 million and $0.2 million for the three months ended June 30, 2012 and 2011, respectively, and $0.6 million and $0.4 million for the six months ended June 30, 2012 and 2011, respectively, attributable to the two Japanese funds is presented as net income attributable to non-controlling interest in the Company's consolidated statements of income for the three and six months ended June 30, 2012 and 2011.

Collateralized Financing Obligations

In November 2011 and June 2012 the Company transferred two container portfolios for $10.0 million and one container portfolio for $17.2 million, respectively, to Japanese investor funds while concurrently entering into lease agreements for the same containers, under which the Company will lease the containers back from the Japanese investors. In accordance with ASC 840, Sale-Leaseback Transactions, the Company concluded these were financing transactions under which sale-leaseback accounting was not applicable.

The container funds under financing arrangements are considered VIEs under ASC 810 because as lessee of the funds, the Company has the power to direct the activities that most significantly impact the entity's economic performance including the leasing and managing the containers owned by the funds. The terms of the transactions include options for the Company to purchase the containers from the funds at a fixed price. As a result of the residual interest resulting from the fixed price call option, the Company concluded that it may absorb a significant amount of the variability associated with the funds' anticipated economic performance and as a result the Company has a variable interest in the funds. As the Company has the power to direct the activities that most significantly impact the economic performance of the VIEs and the variable interest provides the Company with the right to receive benefits from the entity that could potentially be significant to the funds, the Company determined that it is the primary beneficiary of these VIEs and included the VIEs' assets and liabilities as of June 30, 2012 and December 31, 2011 and the cash flows of the VIEs for the six months ended June 30, 2012 in the Company's consolidated financial statements.

The containers transferred to the consolidated VIEs under financing arrangements had a net book value of $26.2 million as of June 30, 2012. The container equipment has been included on the Company's consolidated balance sheet with the offsetting debt related to the funds presented separately as collateralized financing obligations of $26.8 million in the debt section of the Company's consolidated balance sheet as of June 30, 2012. No gain or loss was recognized upon the initial consolidation of the VIEs in November 2011 or June 2012. As of December 31, 2011, the debt related to the collateralized financing obligations was included in capital lease obligations in the accompanying balance sheet.