Non- Controlling Interest
Part 1
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
A variable interest entity (VIE) can be defined as a legal entity in which a given investor holds controlling interests even without having a majority of its share ownership. VIE can be a corporation, trust, partnership, or joint venture. It is designed such that if investors do not have the majority shares, they can exercise a controlling interest in it. According to Cieślik (2021), one of the VIE characteristics is that an entity’s equity is insufficient to support operations. Another characteristic is residual equity holders do not control the VIE. The residual equity holders are shielded from the gain and losses that are linked with ownership. The organizations create a VIE to protect their business from legal actions by their creditors. VIE gained huge attention from the Enron Company. This article intends to evaluate the term VIE and understand how it contributed to an ethical issue in the Enron company.
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