Variable Interest Annuities (VIE’s) have gained wide attention due to the company Enron. Based on this weeks reading and weekly lecture:
Explain what VIE’s are and what part did VIE’s play in the collapse of Enron?
Does the Walt Disney Company have any VIE’s? Who are they, where are they located and how does the company account for the VIE’s?
Review the following company VIE’s and comment on the accounting application of the entity:
oGeneral Electric
oConAgra Foods
oTime Warner
oAllegheny Energy
Part 2
Explain the concept of non-controlling interest.
Research examples from corporate financial statements and notes and provide specific examples of non-controlling interest.
Requirements: 2 Pages
Answer preview
VIE is a legal entity in which a given investor holds controlling interests even without having most of its share ownership. VIE can be a corporation, trust, partnership, or joint venture. It is created such that if an investor does not have the majority shares, they can exercise a controlling interest in it. Enron was a US company multinational company that caught the attention of many people after the scandal about irregularities in accounting was uncovered (Chandra, Ettredge, & Stone, 2006). Shockingly, the company shares were at their pick before it was declared bankrupt. The VIE played a part in Enron’s Collapse after it hid the Company’s debts and losses from other shareholders. VIE hid the Company’s losses and made it appear more profitable than it was.
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