What does the Financial Accounting Standards Board now call special purpose entities?
A) Variable interest entities
B) Off-balance-sheet entities
C) Structured finance entities
D) Risk mitigation vehicles

Question

Quizplus · Accepted Answer

The Financial Accounting Standards Board now refers to special purpose entities as variable interest entities. This change was introduced in 2003 to address concerns that the previous term, "special purpose entities," led to confusion and contributed to off-balance-sheet accounting practices. A variable interest entity is a legal structure in which a company invests or owns an interest and where its financing, activities, and operations are managed by another party. These entities are significant as they allow companies to move assets and liabilities off their balance sheets, which can be used to provide a false impression of a firm's financial condition or performance.

What Does the Financial Accounting Standards Board Now Call Special