The Primary Beneficiary of a Variable Interest Entity (VIE) Must

question 31

Multiple Choice

The primary beneficiary of a variable interest entity (VIE) must consolidate the VIE into its financial statements whenever:

• A) substantially all of the entity's activities are conducted on behalf of an investor who has disproportionally few voting rights.
• B) the voting rights are not proportional to the obligations to absorb the expected losses or receive expected residual returns.
• C) the total equity at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties.
• D) the holders of the equity investment at risk have the right to receive the residual returns of the legal entity

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Definitions:

Injunctive Power

The authority granted to courts to issue injunctions—orders requiring a party to do or abstain from doing specific acts.

Antitrust Violations

Acts that infringe upon laws designed to promote competition and prevent monopolies and other activities that restrict trade.

Consent Decrees

Legally binding agreements that resolve disputes between parties without admitting guilt or fault, often used by regulatory agencies to enforce compliance.

Remedial Measures

Actions taken to correct or rectify a problem, often after an error or mistake has been identified.