All of the Following Statements Accurately Describe Special Purpose Entities

question 35

Multiple Choice

All of the following statements accurately describe Special Purpose Entities (SPEs) except for:

• A) SPEs are corporations, trust or partnerships created for a single specified purpose.
• B) SPEs usually have no substantive operations and are used for financing operations.
• C) SPEs are used for asset securitization, risk sharing and taking advantage of tax statues.
• D) A variable interest entity (VIE) is a type of SPE with a limited number of equity investors.

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Definitions:

AASB 136

The Australian Accounting Standards Board standard that details the accounting treatment for impairments of assets.

Impairment

The action of or situation where the value of an asset is corrected downwards in the company's books to reflect a loss in value, ensuring the asset's recorded cost does not exceed its recoverable amount.

Issued Capital

The total value of a company's shares that have been issued to shareholders, representing the equity funding provided by shareholders.

Retained Earnings

Represents the cumulative amount of net income that a company has not distributed to its shareholders as dividends but retained for reinvestment in the business.