Which of the Following Criteria Is Applicable with Respect to Determining

question 81

Multiple Choice

Which of the following criteria is applicable with respect to determining when a variable interest entity (VIE) must be consolidated into the sponsoring firm's financial statements?

• A)A consolidation must occur if the firm has a controlling financial interest and is the VIE's primary beneficiary.
• B)A consolidation must occur if the firm is entitled to receive all of the VIE's residual returns.
• C)A consolidation must occur regardless of the risk of loss exposure.
• D)A consolidation must occur if the sponsoring firm owns more than 50% of the VIE's equity.

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Definitions:

Inspection Right

The legal ability to examine and review documents, records, or properties, typically in a business context.

Scrip Dividend

A type of dividend issued in the form of additional shares rather than cash, increasing the number of shares owned.

Board of Directors

A group of individuals elected to represent shareholders and make major decisions and oversee the management of a corporation.

Declared

An explicit, often formal announcement of a particular status or condition.