The primary beneficiary is the reporting entity, if any, that receives the majority of expected returns or absorbs the majority of expected losses.
CPAs SHOULD RECONSIDER A DECISION ABOUT WHETHER an entity is a VIE if its situation changes so its equity investment at risk is no longer adequate, some or all of the equity investment is returned to investors or the entity undertakes additional activities, acquires additional assets or receives an additional equity investment that is at risk. 46(R) is causing reporting entities to make new decisions about whether affiliated entities need to be consolidated into their financial statements.
According to GAAP (Generally Accepted Accounting Principles), parent companies must prepare consolidated financial statements to report on the financial well-being of both the parent company and all its subsidiaries.
Depending on the size of a company and the complexity of its business, the financial statements may be a bit confusing, particularly if the company has several subsidiaries with overseas operations.Organizing Your Information Setting Up a Worksheet Combining Financial Statements Eliminating Duplicate Values Community Q&A Many large companies are partially or entirely made up of smaller companies that they've acquired throughout the years.After their acquisitions, these smaller companies, or subsidiaries, may have remained legally separate from the large corporation, or parent company.Since each subsidiary also prepares its own standalone financial report, consolidated financial statements may seem to some to be an unnecessary extra step. An analysis of the importance of consolidated financial statements reveals these statements offer several benefits to investors, financial analysts and others who may be evaluating the health of the parent company.In this article, we will review consolidated financial reports in more detail including the unique benefits they offer. Consolidated financial reports are prepared by any parent company that owns one or more subsidiaries.