Question #56
Reading: Reading 8 Intercorporate Investments
PDF File: Reading 8 Intercorporate Investments.pdf
Page: 24
Status: Unattempted
Question
Which of the following statements regarding special purpose entities (SPEs) is least accurate?
Answer Choices:
A. According to U.S. GAAP, if a SPE is considered a VIE, it must be only consolidated by the primary beneficiary
B. According to U.S. GAAP, a special purpose entity is classified as a variable interest entity (VIE) if it has at-risk equity that is sufficient to finance its own activities without additional financial support
C. Under IFRS, a special purpose entity must be consolidated by the entity which exercises control over that entity
Explanation
Under U.S. GAAP rules, a VIE could include a SPE that has at-risk equity that is insufficient
to finance the entity's activities without additional financial support.