When decision making has been outsourced and fees are paid to those decision makers, which of the following would indicate that the investors lack the power to control the entity (making the entity a variable interest entity that a. The decision maker is acting in a fiduciary capacity and the fee arrangement is not a variable interest.

b. A single party can exercise unilateral rights to replace the decision maker.

c. The "at risk" equity investors as a group have the power to remove board members and vote on the decision-maker's compensation.

d. The "at risk" equity investors, as a group, do not have the ability to remove the decision maker.

A reporting entity should carefully analyze an entity's design to determine the variability that the entity was designed to create and distribute to its interest holders, called t model?

a. The risks that an entity may face may include interest rate risk, but not foreign currency exchange risk or operations risk.

b. Variability can be passed on to interest holders through contract terms or issued interests.

c. Subordination of interests behind senior interests does not create variability.

d. Derivatives or fixed-rate investments expected to be sold prior to maturity do not create variability.

In determining whether a legal entity has sufficient "equity investment at risk, which of the following would be included?

a. Equity interests that the legal entity issued in exchange for subordinated interests in other VIEs.

b. Amounts such as fees or contributions provided to the equity investor directly or indirectly by the legal entity or other parties involved with the legal entity.

c. Amounts financed for the equity investor (e.g., loans or guarantees).

d. Equity investments in the entity that significantly participate in the entity's profits and losses, even if they do not carry voting rights.

Which of the following may call into question whether kick out rights are substantive enough to create an economic or operational barrier to exercise those rights?

a. Conditions make it likely that the rights will be exercised.

b. Financial penalties that the limited partners would face upon exercise of kick out rights.

c. An adequate number of qualified replacements for the current decision makers exist.

d. Existence of an explicit mechanism to allow the rights to be exercised.

Which of the following would not be a characteristic that a primary beneficiary of a variable interest entity would need to have in order to consolidate a legal entity?

a. Power to direct activities that most significantly impact the economic performance of the entity.

b. Obligation losses that could potentially be significant to the entity.

c. Rights to receive benefits that could potentially be significant to the entity.

d. Majority voting interest in the entity.