Statements of Position

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Description

This proposed statement of position (SOP) provides guidance on financial reporting by investment companies for high-yield debt securities held as investments. Although the focus of this proposed SOP is on high-yield debt securities, certain guidance is also applicable to other debt securities held as investments by investment companies. It recommends the following: 1. Using the effective-interest method to report interest income on payment-in-kind (PIK) bonds and step bonds; 2. Writing off interest receivable on defaulted high-yield debt securities in accordance with Financial Accounting Standards Board Statement No. 5, Accounting for Contingencies, and allocating the write-off between income, for the portion that had been recognized as income, and the cost of the related investment for the portion purchased; 3. Reporting capital infusions in support of high-yield debt securities as additions to cost; reporting other expenditures, excluding workout expenditures, as additions to cost only to the extent that they increase legally enforceable claims against the issuer of the securities; and reporting workout expenditures as operating expenses; 4. Procedures to be considered by auditors for reviewing the valuations of high-yield debt securities to be reported in financial statements.

Publication Date

1992

Relational Format

Book

Keywords

Mutual funds -- United States -- Accounting; Securities -- United States -- Accounting

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.

Proposed statement of position : financial accounting and reporting for high-yield debt securities by investment companies : proposed amendment to AICPA Audit and accounting guide, Audits of investment companies ;Financial accounting and reporting for high-yield debt securities by investment companies : proposed amendment to AICPA Audit and accounting guide, Audits of investment companies; Exposure draft (American Institute of Certified Public Accountants), 1992, March 4

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