Essay Case 11-3

1133 Words Apr 11th, 2014 5 Pages
Case 11-3
Master of the Universe

TABLE OF CONTENTS

Statement of facts……………………………………………... 3 Question 1…………………………………………………….. 5 Solution……………………………………………….. 5 Question 2…………………………………….......................... 6 Solution……………………………………………….. 6 Question 3…………………………………………………….. 7 Alternatives…………………………………………… 7 Solution……………………………………………….. 8

STATEMENT OF FACTS Saturn and Venus, form Jupiter, a joint venture. Saturn owns 51 percent of Jupiter and Venus owns 49 percent of Jupiter. The purpose of Jupiter is to own and operate organic clothing design and manufacturing facilities and sell organic
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Equity interests with or without voting rights are considered variable interests if the legal entity is a VIE and to the extent that the investment is at risk…” Also, ASC 810-10-55-19 states as a general rule, assets and operations of an entity create its variability, meanwhile its liabilities and equity interest absorb the variability. It also states that the variable interest absorb or receive the expected variability created by those assets, liabilities, or contracts of a VIE that are not variable interests. Because Saturn Inc. and Venus Inc. have investments in the residual interest and debt securities of Jupiter, both companies are variable interest holders of Jupiter.

QUESTION NUMBER 3
Who, if anyone, is the primary beneficiary and why?

ALTERNATIVES
Alternative 1 – Venus is the primary beneficiary of Jupiter.
The distribution of clothing and decisions related to distribution could be the most significant impact on the economic performance of Jupiter. Venus has the obligation to absorb losses of Jupiter or the right to receive benefits from Jupiter and has the power to direct distributing activities of Jupiter that could affect significantly Jupiter’s economic performance.

Alternative 2 – Saturn is the primary beneficiary of Jupiter.
Saturn has the power to direct operating

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