Variable interest entities have what characteristics?
VARIABLE INTEREST ENTITIES
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. U. S. GAAP refers to such entities as a variable interest entity (VIE). A variable interest entity is an entity that meets one or both of the following criteria:
1 . The invested equity is so small that the entity requires other financial support to sustain
its activities.
2 . The equity owners lack meaningful decision rights.
If the entity qualifies as a VIE, U.S. GAAP requires the primary beneficiary (if one exists)
of the VIE to consolidate the VIE.
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