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Mr.Pike

In: Business and Management

Submitted By dirtypike123
Words 370
Pages 2
Fall
13
Fall
13
Professional Accounting 2
Professional Accounting 2
Venturing into Consolidation
[Assignment 2]
Venturing into Consolidation
[Assignment 2]
08
Fall
08
Fall

The Accounting Standards Codification states “a legal entity that is deemed to be a business” unless any of the following conditions exist: First, reporting entity participated significantly in the design or redesign of the legal entity (ASC 810-10-15-17d). This condition does not apply if the legal entity is an operating joint venture or under joint control of the reporting entity and one or more independent parties. Secondly, all activities conducted on behalf of the reporting entity. In case of LeaseMed, it substantially all of the activities of LeaseMed do not involve or are not conducted on behalf of either venturer. Next, if the entity provides more than half of total equity, subordinated debt, or other forms of subordinated financial support, the entity does not qualify for business scope exception. In this case, DeviceCo provided 55% of the total equity. Lastly, if activities of the legal entity are primarily related to securitization, asset-backed financings or single-lessee leasing arrangements (ASC 810-10-15-17d), the business needs to be evaluated by a reporting entity. Therefore, Pharamador qualify for the business scope exception.
The total equity investment at risk is not sufficient to permit the legal entity to finance its activities without additional subordinated financial support provided by any parities, including equity holder (ASC 810-10-25-45). In this case, the total equity at risk is 1 million dollars and LeaseMed has zero debt. Therefore, the equity at risk is 100% of total assets. According to ASC 810-10-25-47, “often, no single factor will be conclusive and the determination will be based on the preponderance of evidence.” LeaseMed is a new growing...

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