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Vie Case

In: Business and Management

Submitted By jharri16
Words 4283
Pages 18
Joseph Harris
VIE Case 2016
Professor Fuehrmeyer
22 February 2016
Game of Thrones and VIEs
Before going into any details on this case between Stark, Baratheon, Lannister, and Targaryen Financial, let’s summarize what they are, how they’re involved, and any other key facts to know as well. 1. Stark LLP is a car manufacturer (Enterprise #1) and Baratheon Inc. is an electric car development technology company (Enterprise #2) 2. The two enterprises jointly formed Lannister (the Entity) to produce electric cars for the mass market and collaborate with government mandates towards the auto industry 3. In terms of ownership towards Lannister: Start has 60% and Baratheon has 40% 4. Lannister’s Board of Directors is composed equally by the two enterprises with four members (two from Stark and two from Baratheon) 5. The two enterprises financed Lannister with 30% equity and 70% bank debt 6. Stark’s 60% is supposedly composed of 18% equity and 42% debt and Baratheon’s 40% is supposedly composed of 12% equity and 28% debt 7. Baratheon received a loan from Stark through Targaryen Financial who required that Stark through the loan guarantee Lannister’s debt to cover Baratheon’s equity interest
First, let’s be sure we clarify what things qualify as variable interests due to possibility of consolidating the entity (Lannister) as a variable interest entity. There are particularly four favorite types of variable interests in section of ASC 810-10: 1) Equity, 2) Debt, 3) Guarantees, and 4) Options. However, paragraph 22 of section 55 clarifies how only equity that is at risk falls under the classification of a variable interests. Thus, not all possible equity is a variable for the entity or Lannister in this case and Stark may have possible variable interest of Baratheon’s equity interest then (bullet point #7). Paragraph 23 then points out how…...

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