AC450 Unit6 Discussion - Topic#1 Variable Interest Entities...

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Topic #1: Variable Interest Entities There are many forms of relationships a firm can have with another organization. One of these common forms is the variable rate entity. Please consider this concept as you answer the following questions: Describe a variable interest entity. An entity (investee) in which the investor has obtained less than a majority-owned interest, according to the United States FASB. A variable interest entity (VIE) is subject to consolidation if certain conditions exist (Investopedia, 2016). How is the primary beneficiary established? the primary beneficiary is the one who has the ability to absorb a significant share of the VIE’s losses or receive a significant share of the VIE’s residual returns or both. The fact that the primary beneficiary may own no voting shares whatsoever becomes inconsequential because such shares do not effectively give the equity investors power to exercise control (Hoyle 254).
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