Statements of Position



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The proposed revision of the AICPA Industry Audit Guide, Audits of Investment Companies, reflects changes in accounting literature, laws, and regulations that have occurred since the guide was last published in 1973. The draft incorporates Statements of Position 74-11, 77-1, and 79-1; several amendments adopted into law by the Internal Revenue Code; revised SEC rules; and changes in industry practices. The draft recommends the following additional changes in accounting and reporting practices, which the committee believes are desirable and warranted: 1. The per share data presented as supplementary information has been modified and the amount of ratio information increased. Information on the portfolio turnover rate has been deleted. 2. The sample financial statements have been modified to reflect requirements in accordance with the SEC's revision of article 6 of Regulation S-X, which is effective for years ending after June 15, 1983. The most notable change is the adoption of an all-inclusive income statement. 3. The proposed guide recommends one accounting method for all tax-free business combinations of investment companies. That method most closely approximates the accounting followed for tax purposes. 4. Dividends declared on short securities are treated as an expense to reflect current preferred accounting treatment, not as a reduction of investment income as suggested in the present guide. 5. Chapters discussing unit investment trusts and variable annuities, including their financial statements, have been added. 6. The use of third-party reviews of internal accounting controls is discussed. 7. An accounting treatment for distribution expenses under a distribution plan adopted under rule 12(b)(l) of the Investment Company Act of 1940 is recommended. 8. The discussion of accounting matters related to portfolios has been expanded to include accounting for commodities and futures, forward placement and standby commitment contracts, repurchase agreements, and foreign investments. 9. The proposed guide states that using a statement of net assets in place of a statement of assets and liabilities is acceptable under GAAP and the particular use should depend on which presentation is more meaningful to the investor. The SEC's revised rules under article 6 of Regulation S-X proscribe the use of the statement of net assets if the amount of investment in securities of unaffiliated issuers is not at least 95 percent of total assets. 10. The SEC's August 15, 1984 proposal, "Semi-Annual Report Form for Registered Investment Companies," would replace Form N-1R and Form N-5R with Form N-SAR. If adopted, the final guide will be revised accordingly.

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Mutual funds -- Auditing -- Standards -- United States; Financial statements -- Standards -- United States; Capital gains tax -- Auditing -- Standards -- United States; Dividends -- Auditing -- Standards -- United States; Disclosure in accounting


Accounting | Taxation


Originally published by: American Institute of Certified Public Accountants; Copyright and permission to reprint held by: American Institute of Certified Public Accountants.

Proposed audit and accounting guide : audits of investment companies ;Audits of investment companies; Exposure draft (American Institute of Certified Public Accountants), 1985, Jan. 15



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