The usual criterion for preparing consolidated financial statements is voting control in the form of majority ownership of common stock.However, for some entities common stock ownership does not indicate control because the common stock of the entity lacks one or more of the economic characteristics associated with equity.U.S.GAAP refers to such entities as a _____ entity.

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A variable interest entity (VIE) is an entity where the voting rights are not the only factor determining control. In a VIE, control is based on a contractual arrangement or other agreement that gives one party (the variable interest holder) the power to direct the activities that significantly impact the economic performance of the entity. Due to this unique control structure, U.S. GAAP requires consolidation of VIEs.

The Usual Criterion for Preparing Consolidated Financial Statements Is Voting