The Usual Criterion for Preparing Consolidated Financial Statements Is Voting

question 42

Multiple Choice

The usual criterion for preparing consolidated financial statements is voting control in the form of majority ownership of common stock.However, for some entities common stock ownership does not indicate control because the common stock of the entity lacks one or more of the economic characteristics associated with equity.Which of the following is/are true?

• A)U.S.GAAP refers to such entities as a variable interest entity (VIE).
• B)If the invested equity is so small that the entity requires other financial support to sustain its activities, it meets the criteria for a variable interest entity.
• C)If the equity owners lack meaningful decision rights, it meets the criteria for a variable interest entity.
• D)choices a and b, only
• E)choices a, b, and c.

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