Situation 1

A limited partnership is formed to develop commercial real estate. The partnership has three limited partners and each of them holds a 32% equity investment in the fund. These investments are considered equity investment at risk and the partnership is considered to have sufficient equity at risk. The general partner holds 4% of the equity interest in the partnership. All partners share profits and losses in relationship to their equity interests. The general partner makes all day-to-day decisions in running the partnership, but a simple majority of the limited partners voting interests can remove the general partner without cause. Is this partnership a Variable Interest Entity?

Situation 2

Two companies enter into a joint marketing arrangement. Each company agrees to collaboratively produce marketing materials and use their existing sales channels to market the products and services of the other. Each company contractually agrees to share a specified percentage of the revenues

received from the sale of products and services made under the joint marketing arrangement to customers of the other company. However, no separate entity is established to conduct the joint marketing activities, and each company retains its own assets and continues to conduct its activities separately from the other. Does the variable interest model apply to this arrangement?

Situation 3

Assume Company A leases a building from a not-for-profit entity (lessor) and concludes that, by applying the Variable Interest Model, it is the not-for-profit entity's primary beneficiary.Is Company A required to consolidate the not-for-profit entity?

Situation 4

Enterprise A, Enterprise B and Enterprise C are unrelated parties that form an entity, Ice Cream Co., to manufacture, distribute and sell ice cream. Each enterprise obtained 33.33% of the equity of Ice Cream Co. through equal contributions of cash upon formation of the entity. All profits and losses of

Ice Cream Co. are allocated to the equity investors in proportion to their equity ownership. The enterprises hold no other variable interests in Ice Cream Co. besides their equity interests. There are no other variable interest holders in Ice Cream Co. Ice Cream Co. is determined to be a Variable Interest Entity.

Each enterprise can appoint one member to the board of directors. The board of directors hires a management team to carry out the day-to-day operations of the entity. All decisions related to Ice Cream Co.'s significant activities are taken to the board of directors and require the unanimous consent of all three directors. Which Enterprise, if any, is the primary beneficiary?