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Answered Same Day Apr 29, 2021

Solution

Suvrat answered on Apr 30 2021

144 Votes

Sheet1
        YOUR NAME
        Objectives of the Case
         This case considers the appropriate consolidation accounting when related-party relationships exist. Students are asked to apply their thinking to a specific example in which the equity owners of an entity are related parties and share control over the decision-making of such entity.
        Applicable Professional Pronouncements
        ASC 810-10, Consolidation: Overall
        ASC 810-10-15-14
        ASC 810-10-15-17
        810-10-25-2 through 25-14
        ASC 810-10-25-43
        ASC 810-10-25-45
        ASC 810-10-55-37 through 55-38
        Required
    1    Identify the holder[s] of equity at risk                Auto Co                ASC references
        Explain
        Auto Co is the holder of equity at risk in this JV. This is because the JV has 30% equity portion which is paid by Auto Co (for its portion) and also the portion of Electric Co was paid by Auto Co via loan to Electric Co. The 70% debt which is financed by Third Party Bank also holds AutoCo as a gurantor. Therefore Auto is the holder of equity at risk in case the JV fails.                                810-10, Consolidation:Overall
    2    Is JV a VIE?                         Yes
        Explain
        JV is a VIE as the ASC 810 states that if a reporting entity has a interest in an entity it must review ASC 810-10-15-14 to determine if the entity is VIEand if it is, then the reporting entity should review ASC 810-10-15-17 for any scope...

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