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special purpose entities

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A staff person was assigned to the audit of a publicly traded company, and the senior had asked you to evaluate both share-based payment reporting and special purpose entities (SPE) reporting for the company.

Research share-based payment reporting and SPE reporting individually.

Write an executive memo as a team that includes a description of what you will look for to see if the client is consistent with the generally accepted accounting principles (GAAP). Pay particular attention to accounting treatment of share-based payment and accounting consolidation theory as it relates to special purpose entities. Keep the memo as brief as possible while fully exploring the issues.

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To: Mr. G. Alexander
From: Staff
Subject: Share based payment and accounting consolidation theory as applied to special purpose entities
Date: September 3, 20xx

I will be evaluating to see if the client is consistent with the generally accepted accounting principles. In particular, I will be evaluating to the treatment of share based payment and accounting consolidation theory as related to special purpose entities.

First, a share based payment is a transaction in which the entity receives or acquires goods or services either as consideration for its equity instruments or by incurring liabilities for amounts based on the price of entities shares or other equity instruments. A special purpose entity is formed with a special purpose. Usually, the purpose is to isolate an activity, operation or asset from the rest of the business. Such a business is created to fulfill a narrow, particular or provisional objective. The purpose is to cut off the firm from the financial risk. Now the entity on whose behalf the special purpose entity was created transfers assets to the special purpose entity. This transfer may take the form of share-based payment. From the accounting point of view, I shall ensure that the transfer takes place at the fair price of the share-based payment. From ...

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This response presents a brilliant discussion on special purpose entities

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