Question

An enterprise with a variable interest with a controlling financial interest in a VIE is the primary beneficiary and will have what two characteristics?

Answer 1

The primary beneficiary of a VIE is the enterprise with a variable interest that has the power to direct the VIE's activities and the obligation to absorb losses or receive benefits.

Step-by-step explanation:

In the context of a variable interest entity (VIE), the primary beneficiary is the enterprise that has the controlling financial interest in the VIE. The primary beneficiary is determined by two characteristics:

1. The power to direct the activities of the VIE that most significantly impact its economic performance
2. The obligation to absorb losses or receive benefits of the VIE that could potentially be significant to the VIE

Therefore, the enterprise with a variable interest that meets these two characteristics will be considered the primary beneficiary.