Chapter 16 - Solution Manual

Staff fn3 that would be indicative of an investor not

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staff FN3 that would be indicative of an investor not being part of a collaborative group include: [EITF D-097, paragraph , sequence 8] ] contingent upon any other investor making investments in the investee. [EITF D-097, paragraph , sequence 14] ] [The investor does not have other relationships with any other investor that are material to either investor. [EITF D-097, paragraph , sequence 15] ] [II. Risk of Ownership [EITF D-097, paragraph , sequence 16] ] [The investor is investing at fair value. [EITF D-097, paragraph , sequence 17] ] [The investor invests funds from its own resources. [EITF D-097, paragraph , sequence 18] ] [The investor fully shares with all other investors in the risks and rewards of ownership in the investee in proportion to its class and amount of investment. That is, the investor's downside risk or upside reward are not limited, and the investor does not receive any other direct or indirect benefits from any other investor as a result of investing in the investee. FN4 [EITF D-097, paragraph , sequence 19] ] [FN4 Topic No. D-97 Footnote 4—Put options, call options, tag-along rights, and drag- along rights should be carefully evaluated. They may act to limit an investor's risk and rewards of ownership, effective voting rights, or ability to sell its investee shares. A tag- along right grants a shareholder the option to participate in a sale of shares by the controlling shareholder or collaborative group, generally under the same terms and in the same proportion. A drag-along right grants the controlling shareholder or collaborative group the option to compel shareholders subject to the drag-along provision to sell their shares in a transaction in which the controlling shareholder or collaborative group transfers control of the company, generally under the same terms and in the same proportion. [EITF D-097, paragraph , sequence 20] ] [The funds invested by the investor are not directly or indirectly provided or guaranteed by any other investor. [EITF D-097, paragraph , sequence 21] ] [The investor is at risk only for its own investment in the investee and not another's investment in the investee. That is, the investor is not providing or guaranteeing any part of another investor's investment in the investee. FN5 [EITF D-097, paragraph , sequence 22] ] [FN5 Topic No. D-97 Footnote 5—See footnote 4. [EITF D-097, paragraph , sequence 23] ] [III. Promotion [EITF D-097, paragraph , sequence 24] ]
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351 [The investor did not solicit other parties to invest in the investee. [EITF D-097, paragraph , sequence 25] ] [IV. Subsequent Collaboration [EITF D-097, paragraph , sequence 26] ] [The investor is free to exercise its voting rights in any and all shareholder votes. [EITF D-097, paragraph , sequence 27] ] [The investor does not have disproportionate or special rights that other investors do not have, such as a guaranteed seat(s) on the investee's board, required supermajority voting rights for major or significant corporate decisions, guaranteed consent rights over corporate actions, guaranteed or specified returns, and so forth. [EITF D-097, paragraph , sequence 28] ]
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