Question

According to U.S. GAAP, criteria for classification of an organization as a variable interest entity include all of the following except?

1) Control by a single party
2) Lack of sufficient equity investment
3) Substance over form
4) Variable interest in the organization

Answer 1

The correct option is 3. According to U.S. GAAP, the criteria for classification of an organization as a variable interest entity include control by a single party, lack of sufficient equity investment, and variable interest in the organization. Substance over form is not specifically mentioned as a criterion.

Step-by-step explanation:

According to U.S. GAAP (Generally Accepted Accounting Principles), the criteria for classification of an organization as a variable interest entity include control by a single party, lack of sufficient equity investment, and variable interest in the organization.

The exception would be substance over form. Substance over form refers to the importance of the economic substance of a transaction rather than its legal form. In other words, it focuses on the economic reality of a transaction rather than just its legal form. While substance over form is an important accounting concept, it is not specifically mentioned as a criterion for classifying an organization as a variable interest entity under U.S. GAAP.