Document ID: chunk:federal_register_of_legislation:F2025C00172:body:0:p11
Version: federal_register_of_legislation:F2025C00172
Segment Type: other
Provision Reference: 
Character Range: 27399–30494

and financing activities significantly affect their returns. Examples of activities that, depending on the circumstances, can be relevant activities include, but are not limited to:
(a) selling and purchasing of goods or services;
(b) managing financial assets during their life (including upon default);
(c) selecting, acquiring or disposing of assets;
(d) researching and developing new products or processes; and
(e) determining a funding structure or obtaining funding.
B12 Examples of decisions about relevant activities include but are not limited to:
(a) establishing operating and capital decisions of the investee, including budgets; and
(b) appointing and remunerating an investee's key management personnel or service providers and terminating their services or employment.
B13 In some situations, activities both before and after a particular set of circumstances arises or event occurs may be relevant activities. When two or more investors have the current ability to direct relevant activities and those activities occur at different times, the investors shall determine which investor is able to direct the activities that most significantly affect those returns consistently with the treatment of concurrent decision-making rights (see paragraph 13). The investors shall reconsider this assessment over time if relevant facts or circumstances change.

Application examples
Example 1
Two investors form an investee to develop and market a medical product. One investor is responsible for developing and obtaining regulatory approval of the medical product—that responsibility includes having the unilateral ability to make all decisions relating to the development of the product and to obtaining regulatory approval. Once the regulator has approved the product, the other investor will manufacture and market it—this investor has the unilateral ability to make all decisions about the manufacture and marketing of the product. If all the activities—developing and obtaining regulatory approval as well as manufacturing and marketing of the medical product—are relevant activities, each investor needs to determine whether it is able to direct the activities that most significantly affect the investee's returns. Accordingly, each investor needs to consider whether developing and obtaining regulatory approval or the manufacturing and marketing of the medical product is the activity that most significantly affects the investee's returns and whether it is able to direct that activity. In determining which investor has power, the investors would consider:
(a) the purpose and design of the investee;
(b) the factors that determine the profit margin, revenue and value of the investee as well as the value of the medical product;
(c) the effect on the investee's returns resulting from each investor's decision-making authority with respect to the factors in (b); and
(d) the investors' exposure to variability of returns.
In this particular example, the investors would also consider:
(e) the uncertainty of, and effort required in, obtaining regulatory approval (considering