Which of the Following Is True Regarding SIC 12, "Consolidation--Special

question 23

Multiple Choice

Which of the following is true regarding SIC 12, "Consolidation--Special Purpose Entities", and FIN 46R, "Consolidation of Variable Interest Entities"?

• A) Both pronouncements state that technical voting control of an SPE is the determining factor in deciding to consolidate a variable-interest or special-interest entity.
• B) Both pronouncements state that the substance of the relationship between an entity and the variable-interest or special-purpose entity is the determining factor in deciding to consolidate a variable-interest or special-purpose entity.
• C) Both pronouncements state that the entity expected to bear the majority of the expected gains or losses of the variable-interest or special-purpose entity should consolidate the variable-interest or special-purpose entity.
• D) Both pronouncements show evidence of being a principles-based standard.

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Definitions:

Net Income

A company's total earnings or profit, calculated as revenue minus expenses, taxes, and costs.

FOB Destination

A shipping term indicating that the seller is responsible for the goods until they are delivered to the buyer's specified location, whereupon title and risk of loss pass to the buyer.

Revenue Recognition

The accounting principle dictating the specific conditions under which revenue is recognized or recorded.

Shipment Date

The shipment date is the day on which goods are officially transferred from the seller to the carrier or dispatched for delivery to the buyer.