Determine whether a ViE should be consolidated

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Question - Consolidation of Variable-Interest Entities - Some accounting theorists propose that firms should consolidate any entity in which they have a "controlling financial interest." Typically, the percentage of equity ownership that one firm has in another entity determines whether consolidation is appropriate, with greater than 50% ownership requiring consolidation. Why is the percentage of ownership criterion often not appropriate for judging whether a VIE should be consolidated? What criterion is used to determine whether a ViE should be consolidated?

Reference no: EM132901911

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