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Case 11-3

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1. The primary purpose and design of Jupiter is to operate organic clothing and to sell to unrelated retailers. The risks of Jupiter will flow right back to Venus and Saturn. The percent’s being 51% for Saturn and 49% for Venus. All loss and profit are split according to the ownership percentages.
2.
Both Venus and Saturn are Variable interest holders. “A controlling financial interest in the VIE model requires both of the following: 1) the power to direct the activities that most significantly impact the VIE’s economic performance. 2) The obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE” According to this over view in the codification 810-10-05 we see that the two companies are both variable interest holders. They have the power to make decisions regarding the operations of Jupiter, the Board consist of all people from Saturn and Venus. They also are required to absorb all the losses from Jupiter and benefit from its profits. They are in essence completely accountable for Jupiter.
3.
The primary beneficiary would be Saturn. The reason for this is because Saturn owns more than 50% of Jupiter. According to the codification 810-10-25-38A you need to have both of the characteristics I mentioned above in answer 2. Though both Saturn and Venus have both of these characteristic according to this codification only one of the companies can be a primary beneficiary. So that would be…...

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