Question
An investor purchased 15% of the outstanding equity of a company. The investor has the right to appoint a member to the companys 5-member board.
An investor purchased 15% of the outstanding equity of a company. The investor has the right to appoint a member to the companys 5-member board. The auditor states that the relationship qualifies as a VIE, thus consolidation is required. The investor states that the investment should only be accounted for using the fair value method; consolidation is not an issue because of the small portion of equity purchased. What questions might you ask to support the auditors position? What questions might you ask to support the investors position? NOTE: it may help to identify the Codification guidance related to each of their positions.
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