FASB 1.docx - Case 16-6 Closely Associated Cars Is JV a variable interest entity(VIE 1 Before determining if JV is valuable interest entity it is

FASB 1.docx - Case 16-6 Closely Associated Cars Is JV a...

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Case 16-6: Closely Associated Cars Is JV a variable interest entity (VIE)? 1. Before determining if JV is valuable interest entity it is important to examine the equity investment. if the total equity investment is not sufficient to allow the entity to finance its activities without additional subordinate financial support it is an indicator that the entity should be consolidated ASC (810-10-15-14). This would include support from equity holders. Another area of interest lies in determining the holders of equity investment a risk black the direct or indirect ability to make decisions about jayvees activities which have a significant effect on the success of JV. According to FASB “legal entities that are not controlled by the holder of a majority voting interest because of not controlling shareholder veto rights are not VIES if the shareholders as a group have the power to control the entity “(ASC 810-10-15-14). Hence, JV is a VIE since JV meets the definition of a VIE under section 810-10-14 and since AutoCo and ElectricCo formed an entity instead of joining two separate ones. Also, since both entities hold exactly half of
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  • Fall '18
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