Which of the following is an accurate statement about the variable interest accounting model?

a. Voting interest control is required for consolidation.

b. The model focuses primarily on evaluating power and economics.

c. An entity's exposure to potentially significant gains and losses is not necessary for consolidation under the variable interest model.

d. Power to direct an entity's key activities is not relevant to the variable interest model.

Which of the following will most likely be exempt from the need to evaluate whether the variable interest entity consolidation is required?

a. The reporting entity has a relationship with a legal entity that does not meet the definition of a business.

b. The reporting entity has a relationship with a legal entity that meets the definition of a business.

c. The reporting entity has a relationship with an entity that is not capable of being managed for the purpose of providing a return directly to investors.

d. The reporting entity has a relationship with a legal entity that does not have inputs and processes capable of producing outputs.

Which of the following would most likely be a strong indicator that substantially all of a legal entity's activities either involve or are conducted on behalf of the reporting entity and its related parties?

a. The reporting entity holds a fixed-price "out-of-the-money" put option related to the entity's equity investments.

b. The reporting entity does not have an economic interest in the entity's research and development activities.

c. The principal purpose of the entity is to conduct a uniquely complementary operation of the reporting entity's business operations.

d. Profit participation is shared equally with the reporting entity and others.

Which of the following is a true statement related to variable interests as defined in the variable interest accounting model?

a. Only senior debt instruments with fixed rates absorb substantial variability in another entity's assets.

b. Guarantees of specific assets may be variable interests.

c. Options exercisable at fair value are variable interests.

d. Options to purchase equity at a fixed "strike price" may be variable interests.

Kick-out rights are the ability to remove the entity with the power to direct the activities of a variable interest entity (VIE) that most significantly impact the VIE's economic performance or to dissolve the VIE without couse. Which of kick-out rights impact the determination of the primary beneficiary of a VIE?

a. Rights to dissolve or liquidate the VIE without cause are not considered to be kick-out rights for determining the primary beneficiary.

b. Kick-out rights do not impact whether a potential beneficiary meets the power criterion unless a single reporting entity (including related parties and de facto gents) has a unilateral right to exercise those rights.

c. If two or more related parties are required to come together to exercise kick-out rights, then it does not impact the power criterion assessment.

d. A board of directors comprised of multiple parties that each have kick-out rights typically impacts whether a reporting entity meets the power criterion as it relates to determining the primary beneficiory.