Problem:
Larue, Inc. purchases the bulk its inventory from Stag Corporation. One officer of Larue presently serves on the Board of Directors of Stag. It has been necessary for Stag to borrow a lot of money over the past five years and Larue is concerned about Stag's ability to survive as a going concern. Larue has assumed all of Stag's debt in return for placing two more officers on the Board of Directors of Stag. If Stag is profitable over the next three years, then Larue will buy the equity shares of Stag making Stag a subsidiary of Larue.
REQUIRED: Is Stag a Variable Interest Entity of Larue? Why? Include accredited sources such as the ASC, SFAS, etc....