Document ID: chunk:federal_register_of_legislation:F2016C00028:reg:26:p16
Version: federal_register_of_legislation:F2016C00028
Segment Type: reg
Provision Reference: reg 26 (pt 16/47)
Character Range: 52613–56368

joint ventures, and outsourcing activities.

                   + Geographic dispersion and industry segmentation.

                   + Location of production facilities, warehouses, and offices, and location and quantities of inventories.

                   + Key customers and important suppliers of goods and services, employment arrangements (including the existence of union contracts, superannuation and other post-employment benefits, share option or incentive bonus arrangements, and government regulation related to employment matters).

                   + Research and development activities and expenditures.

                   + Transactions with related parties.

           * Investments and investment activities such as:

                   + Planned or recently executed acquisitions or divestitures.

                   + Investments and dispositions of securities and loans.

                   + Capital investment activities.

                   + Investments in non‑consolidated entities, including partnerships, joint ventures and special‑purpose entities.

           * Financing and financing activities such as:

                   + Major subsidiaries and associated entities, including consolidated and non‑consolidated structures.

                   + Debt structure and related terms, including off‑balance‑sheet financing arrangements and leasing arrangements.

                   + Beneficial owners (local, foreign, business reputation and experience) and related parties.

                   + Use of derivative financial instruments.

           * Financial reporting practices such as:

                   + Accounting principles and industry-specific practices, including industry‑specific significant classes of transactions, account balances and related disclosures in the financial report (for example, loans and investments for banks, or research and development for pharmaceuticals).

                   + Revenue recognition.

                   + Accounting for fair values.

                   + Foreign currency assets, liabilities and transactions.

                   + Accounting for unusual or complex transactions including those in controversial or emerging areas (for example, accounting for share‑based compensation).

A33.         Significant changes in the entity from prior periods may give rise to, or change, risks of material misstatement.

Nature of Special‑Purpose Entities

A34.         A special‑purpose entity (sometimes referred to as a special purpose vehicle) is an entity that is generally established for a narrow and well‑defined purpose, such as to effect a lease or a securitisation of financial assets, or to carry out research and development activities.  It may take the form of a corporation, trust, partnership, or unincorporated entity.  The entity on behalf of which the special‑purpose entity has been created may often transfer assets to the latter (for example, as part of a de-recognition transaction involving financial assets), obtain the right to sue the latter's assets, or perform services for the later, while other parties may provide the funding to the latter.  As ASA 550 indicates, in some circumstances, a special‑purpose entity may be a related party of the entity.[12]

A35.         Financial reporting frameworks often specify detailed conditions that are deemed to amount to control, or circumstances under which the special‑purpose entity should be considered for consolidation.  The interpretation of the requirements of such frameworks often demands a detailed knowledge of the relevant agreements involving the special‑purpose entity.

The Entity's Selection and Application of Accounting Policies (Ref: Para.11(c))

A36.         An understanding