ASC 810 describes the operation and reporting of a variable interest entity (VIE

Question

ASC 810 describes the operation and reporting of a variable interest entity (VIE) in regards to consolidation, liability, and recognition. Research the accounting treatment and standards of a VIE in relation to U.S. standards and IFRS standards. Does a U.S. parent entity need to report and consolidate a VIE when the parent has very little control? How do the expected losses impact the reporting process? Requirements: Answer each question for this Critical Thinking Assignment option. It is recommended that you copy and paste each question into your paper (in Microsoft Word) for submission in bold letters, then show work and answer under each question so you can ensure you answer every question. Remember to maintain a formal tone and cite at least two scholarly sources to support your analysis. (Note: You may not use the course textbook to fulfill this requirement.) Your analysis should be two to three pages in length, not counting the required title and reference pages,

Explanation / Answer

An equity at <10% of the legafinancial percentage

l entity’s total assets shall not be considered sufficient to allow the entity to finance its activities without subordinate financial support

But sometimes in certain industries lenders may require the entity to have own higher

Conditions are:

*The entity has demonstrated (e.g., through past debt financing) that it can finance its activities without additional subordinated financial support.

*The entity has at least as much equity invested as other entities that hold only similar assets of similar quality in similar amounts and operate with no additional subordinated financial support.

*The amount of equity invested in the entity exceeds the estimate of the entity’s expected losses based on reasonable quantitative evidence.

Does a U.S. parent entity need to report and consolidate a VIE when the parent has very little control?

How do the expected losses impact the reporting process?

LIABILITY

IMPLICIT VARIABLE INTERESTS

An understanding exists between parties from historical data.

OR

There might be an unwritten (implicit) understanding that the operating company will provide funds to its owner in the event that the guarantee is called upon.

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