Question

A company decides it is required to consolidate a special interest entity. The assets and liabilities of that entity are consolidated at book value, and not revalued to fair value, when

	A.	The company and the entity are already under common control.
	B.	The company owns some of the stock of the entity.
	C.	The company becomes the primary beneficiary of the entity.
	D.	The entity is not previously under the control of the company.

Answer 1

In my point of view here option C is correct.

The primary benificiary is to intially measure and recognise the Assets and Liabilities of the VIE(variable interest entity,also known as special interest entity),except for goodwill,in accordance with ASC 805.

The primary benificiary is to recognise a gain or loss for the difference between the a) fair value of any consideration paid,the fair value of any non controlling interest,and the reported amount of any previously held interest and b) the net amount of the VIE's indentification assets and liabilities recognised and measured under the provision of ASC 805.

When the primary benificiary of the VIE and the VIE are under common control,the primary benificiary is to intially measure the assets, liabilities and non controlling interest of the VIE at their carrying amounts in the accounting records of the entity that controls the VIE or the amounts at which they would be carried by the controlling entity if that entity issued GAAP financial statements.