The Accounting Standards Team of the American Institute of Certified Public Accountants has released four Technical Practice Aids (TPAs) relating to certain financial reporting issues of investment companies, which are summarized as follows:
- TPA 6910.25, Considerations in Evaluating Whether Certain Liabilities Constitute "Debt" for Purposes of Assessing Whether an Investment Company Must Present a Statement of Cash Flows. Per FASB Statement No. 102, Statement of Cash Flows—Exemption of Certain Enterprises and Classification of Cash Flows from Certain Securities Acquired for Resale, an Amendment of FASB Statement No. 95, both registered and unregistered investment companies are exempt from the requirement to provide a statement of cash flows, if all of the following conditions are met:
- During the period, substantially all of the enterprise's investments were highly liquid
- Substantially all of the enterprise's investments are carried at market value.
- The enterprise had little or no debt, based on the average debt outstanding during the period, in relation to average total assets.
- The enterprise provides a statement of changes in net assets.
This TPA addresses whether uncovered options and short sales of securities and reverse repos must be treated as debt under the third criteria above since those transactions/securities are not mentioned in the description of “average debt outstanding” in footnote 2 to paragraph 7 of Statement No. 102.
- TPA 6910.26, Additional Guidance on Determinants of Net vs. Gross Presentation of Security Purchases and Sales/Maturities in the Statement of Cash Flows of a Nonregistered Investment Company. This TPA concludes that if a nonregistered investment company presents a statement of cash flows, the investment company's trading style, investment objectives stated in its offering memorandum, and portfolio turnover should be the primary determinants of net vs. gross reporting. Regardless of whether net or gross reporting is appropriate based on the stated criteria, the TPA states that an entity should separately report its activity related to long positions from activity related to short positions.
- TPA 6910.27, Treatment of Deferred Fees. This TPA discusses the financial reporting implications for situations in which an investment advisor is allowed to elect to defer payment of its management fee, incentive fee, or both.
- TPA 6910.28, Reporting Financial Highlights, Net Asset Value (NAV) Per Share, Shares Outstanding, and Share Transactions When Investors in Unitized Nonregistered Funds Are Issued Individual Classes or Series of Shares. This TPA provides guidance regarding the presentation of certain financial highlights and disclosures for unitized nonregistered funds that issue a separate series of shares to each individual investor in the fund.
These TPAs are available in full at http://www.aicpa.org/download/acctstd/TIS6910_25_28.pdf. |
