A clothing manufacturer (a VIE entity) has two equity holders. Profits and losses of the VIE are split according to ownership percentage; therefore, Equity holder 1 receives 51 percent and Equity holder 2 receives 49 percent of the profits and/or losses. Equity holder 1 controls all decisions regarding distributing clothing in fulfillment of sales negotiated by Equity holder 2 on the VIE’s behalf. Equity holder 2 controls all decisions regarding the design, manufacturing, pricing, and sales of the clothing. Determine which party, if any, is the primary beneficiary? Why?
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
A clothing manufacturer (a VIE entity) has two equity holders.
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