Describe characteristics of special-purpose entities and identify the required financial statements of varying types of entities.
A special-purpose entity is also referred to as a special-purpose vehicle, which is defined as a subsidiary that is created by the parent company for the purpose of isolating financial risk. And, it's legal status as a separate corporation used to make obligations secure even when the parent company went bankrupt.
A parent corporation used to create an SPV for isolating or securitizing assets for a separate corporation, when it was often kept off balance sheet. It was used to create a mechanism for undertaking the risky assets while protecting the parent company from the severe risks of their failure
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