Determining whether decision-maker is a principal or agent.

• Position: FINANCIAL REPORTING

FACTOR:: Decision-maker compensation EXPLANATION:: Decision-maker would assess the nature and size of its compensation (i.e., fees) relative to entity anticipated economic performance, considering:

1. If its compensation is commensurate with the services provided;

2. If its compensation agreement includes only terms, conditions or amounts customary in similar arrangements negotiated at arm's length (i.e., if fees are at market).

   Meeting the compensation factors alone will not be sufficient to demonstrate that a decision-maker is an agent. However, failure to meet either condition will strongly indicate a decision-maker is a principal. Fee subordination (i.e., if fees are subordinate to operating liabilities) would no longer be relevant.

   FACTOR: Other decision-maker interests EXPLANATION: A decision-maker holding interests in an entity other than fees (e.g., equity, debt or a written guarantee) would assess its exposure to the variability of entity returns from those interests, considering:

1. The magnitude of, and variability associated with, its compensation and other interests;

2. If the decision-maker's exposure to variability of entity returns differs (e.g., by holding subordinated interests) from other entity investors;

3. If the decision-maker is exposed to only negative entity returns (e.g., an equity interest or a guarantee), only positive entity returns (e.g., fees) or both; and

4. Its maximum exposure to entity losses.

   If a decision-maker's interests expose it to only positive returns of the entity, the decision-maker is unlikely to be a principal.

   FACTOR: OTHERS' RIGHTS

   EXPLANATION:: Substantive decision-maker kick-out (removal) or participating rights held by parties other than a decision maker and its related parties affect decision-maker ability to direct the activities that most significantly impact entity economic...