Statements of Position

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This Statement of Position (SOP) provides guidance on the application of certain provisions of the AICPA Audit and Accounting Guide Audits of Investment Companies (the Guide) and AICPA SOP 95-2, Financial Reporting by Nonpublic Investment Partnerships, that are directed to the reporting by investment partnerships of financial highlights and the schedule of investments. It amends certain provisions of the Guide and of SOP 95-2 by adapting those provisions to nonregistered investment partnerships based on their differences in organizational and operational structures from registered investment companies. Additionally the SOP incorporates and elevates in authority the guidance provided in previously issued Technical Practice Aids (TPAs) 6910.04 through 6910.10. The guidance in certain TPAs was revised as a result of further deliberations on the above items. Thus the guidance provided by those TPAs is now included in the issues indicated below. The guidance in other TPAs, however, has been carried forward without change. This SOP provides that: 1. Nonregistered investment partnerships, other than those that meet certain criteria as indicated in the next bullet, should calculate and disclose as a financial highlight an annual total rate of return based on a "geometric linking" of performance for each discrete period within a year for which invested capital is constant. 2. Nonregistered investment partnerships that meet the criteria by the terms of their offering document as indicated in the next sentence should calculate and disclose as a financial highlight an internal rate of return since inception for the current and prior accounting period. The partnership criteria are: (1) have limited lives, (2) do not continuously raise capital and are not required to redeem their interests upon investor request, (3) have as a predominant operating strategy the return of the proceeds from disposition of investments to investors, (4) have limited opportunities, if any, for investors to withdraw prior to termination of partnership, and (5) do not invest significantly in market-traded securities. 3. Nonregistered investment partnerships should calculate the denominator of their expense and net investment income ratios based on average net assets (ANA). 4. Nonregistered investment partnerships whose expenses are based on committed capital should provide additional disclosures of the total committed capital of the partnership, the year of formation of the partnership and the year the partnership made its first investment, and the ratio of the total contributed capital to committed capital. 5. Nonregistered investment partnerships should disclose the number of contracts and range of expiration or maturity dates of derivative instruments in the condensed schedule of investments based on whether the fair value (or, for open futures contracts, cumulative appreciation (depreciation)) of a specific type of derivative and underlying (for example, equity index of a particular stock exchange, U.S. Treasury Bond, or natural gas) exceeds 5 percent of net assets, regardless of counterparty. 6. "Funds-of-funds" partnerships should provide certain qualitative disclosures in addition to the name of the investment for investments in nonregistered investment partnerships that exceed 5 percent of net assets. 7. Nonregistered investment partnerships should calculate ANA by using the fund's weighted ANA (as measured at each accounting period) and any other period when capital is contributed or withdrawn. 8. Funds-of-funds and master-feeder funds should calculate net investment income and expense ratios based on the net investment income and expenses reported in the statement of operations. This SOP is effective for annual financial statements issued for fiscal years ending after December 15, 2003, and for interim financial statements issued after initial application. Presentation of previously issued financial highlights on a comparable basis is permitted, but not required. The provisions of the SOP should be applied prospectively from the beginning of the year of adoption.

ISBN

ed03-07-15

Publication Date

2003

Relational Format

Book

Keywords

Mutual funds -- Accounting -- Standards -- United States

Disciplines

Accounting | Taxation

Comments

Originally published by: American Institute of Certified Public Accountants; Copyright and permission to reprint held by: American Institute of Certified Public Accountants; Exposure draft (American Institute of Certified Public Accountants), 2003, July 15

Proposed statement of position : reporting financial highlights and schedule of investments by nonregistered investment partnerships : an amendment to the audit and accounting guide audits of investment companies and AICPA statement of position 95-2, financial reporting by nonpublic investment partnerships;Reporting financial highlights and schedule of investments by nonregistered investment partnerships : an amendment to the audit and accounting guide audits of investment companies and AICPA statement of position 95-2, financial reporting by nonpublic investment partnerships

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