Have a question about a case I am doing in class:
FastCar Parts, a manufacturer of automotive engines, is a nonpublic
entity that leases a building from a related party, RE Properties, LLC.
RE is wholly owned by Charles Bigbux, who alsi is the majority
shareholder (60%) of FastCar. RE was capitalized solely with $30,000
of equity from Bigbux and $970,000 under a loan from a bank. The bank
will have recourse to the assets of RE and to personal assets of
Bigbux. RE owns no assets other than the building leased to FastCar.
The lease meets the requirements for an operating lease under FASB
Statement #13 and contains no explicit guarantees of the residual value
or any fixed-price purchase options. The lease is the only contractual
relationship between FastCar and RE.
Does FastCar, the lessee under the operating lease, hold a variable
interst in RE, the lessor entity?
Now I must back up my answers with authorative literature and have yet
to find anything substantial. My keywords were variable interest,
lesse, lessor, related party, lease, parent, subsidary.
Any ideas or suggestions that might point me in the right direction?
Thanks in advance,