Under Which of the Following Scenarios Would an Entity Not

question 96

Multiple Choice

Under which of the following scenarios would an entity not be classified as a variable interest entity?

• A) The equity investing firms do not have the obligation to absorb the expected losses of the variable interest entity if they occur.
• B) The investing firms do not have the right to receive the expected residual returns of the variable interest entity if they occur.
• C) The total equity investment at risk is sufficient to permit the variable interest entity to finance its activities without additional subordinated financial support from other parties.
• D) The equity investing firms do not have the direct or indirect ability to make decisions about the variable interest entity's activities through voting rights or similar rights.

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Definitions:

Reflection of Feelings

The practice of expressing back the emotions a speaker appears to be conveying, allowing them to explore these emotions further.

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A company is a legal entity formed by a group of individuals to engage in and operate a business—commercial or industrial—enterprise.

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Reductions in the planned spending of a government, organization, or individual, usually to align expenses with available resources or revenues.

Angry

Feeling or showing strong annoyance, displeasure, or hostility.