Wiley GAAP: Financial Statement Disclosure Manual. Joanne M. Flood

Wiley GAAP: Financial Statement Disclosure Manual - Joanne M. Flood


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beneficiary. The Company, through Guangzhou Seaway, entered into certain agreements with Global, pursuant to which the Company receives 90% of Global's net income. The Company does not receive any payments from Global unless Global recognizes net income during its fiscal year. These agreements do not entitle the Company to any consideration if Global incurs a net loss during its fiscal year. If Global incurs a net loss during its fiscal year, the Company is not required to absorb such net loss.

      As a VIE, Global's revenues are included in the Company's total revenues, and any loss from operations is consolidated with that of the Company. Because of contractual arrangements between the Company and Global, the Company has a pecuniary interest in Global that requires consolidation of the financial statements of the Company and Global.

      The Company has consolidated Global's operating results because the entities are under common control in accordance with ASC 805‐10, Business Combinations. The agency relationship between the Company and Global and its branches is governed by a series of contractual arrangements pursuant to which the Company has substantial control over Global. Management makes ongoing reassessments of whether the Company remains the primary beneficiary of Global.

      The net income (loss) attributed to the NCI is separately designated in the accompanying consolidated statements of operations and other comprehensive income (loss).

      FASB ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosure of the fair value of financial instruments held by the Company. FASB ASC Topic 825, Financial Instruments, defines fair value, and establishes a three‐level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

       Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

       Level 2 inputs to the


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