Background Florabama, the only power plant producers that resides in the southwestern of the United States having two investors in Meyers Inc and Saban company. These two investors share a stake of 60% and 40% respectively. Both investing companies contributes cash to the venture in parallel to their ownership percentage in Florabama, also the amount of loss and profits are split accordingly. Florabama is setup in a unique way that has its primary purpose equipped with its risks, pass-through to its interest holders and with the primary beneficiary taking on most of the responsibilities of the company led by the CEO of Florabama.
Issues
Primary Purpose. Florabama primary purpose, the stake of the two companies is to produce power and make a profit out of it. Saban, as part of the …show more content…
ASU 2009-17 is in retrospect of variable interest entities of equity holders of a particular company. In subsection of ASC 810-10-15-14(a) this statement states that Florabama is the variable interest entity. The ASU 2009-17 defines investors voting rights, determine and direct their activities in accordance with the performance of the company that they hold rights to. The statement also discusses the obligations in each entity is to absorb loss if it were to occur in terms of profit and their expected returns. (FASB, pg. 1). Of the overall statement issued in this statement discuss the responsibility of both Meyers Inc. and Saban Company as variable interest holders. ASC 810-25-38A. The primary beneficiary as discussed in the subsection of ASU 2009-17, ASC 810-25-38A determines which of the stakeholders are the primary beneficiary of the company and their obligations and ASC 810-10-25-20 discusses the variable interest entity. (Weiss, pg. 1). In this case, Florabama is the VIE, with two VIH in Saban Company that holds a 40% stake in the company and that would make Meyers as the primary beneficiary with the larger stake of 60%, as they absorb a larger loss or
Issues
Primary Purpose. Florabama primary purpose, the stake of the two companies is to produce power and make a profit out of it. Saban, as part of the …show more content…
ASU 2009-17 is in retrospect of variable interest entities of equity holders of a particular company. In subsection of ASC 810-10-15-14(a) this statement states that Florabama is the variable interest entity. The ASU 2009-17 defines investors voting rights, determine and direct their activities in accordance with the performance of the company that they hold rights to. The statement also discusses the obligations in each entity is to absorb loss if it were to occur in terms of profit and their expected returns. (FASB, pg. 1). Of the overall statement issued in this statement discuss the responsibility of both Meyers Inc. and Saban Company as variable interest holders. ASC 810-25-38A. The primary beneficiary as discussed in the subsection of ASU 2009-17, ASC 810-25-38A determines which of the stakeholders are the primary beneficiary of the company and their obligations and ASC 810-10-25-20 discusses the variable interest entity. (Weiss, pg. 1). In this case, Florabama is the VIE, with two VIH in Saban Company that holds a 40% stake in the company and that would make Meyers as the primary beneficiary with the larger stake of 60%, as they absorb a larger loss or