Statements of Position



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This proposed statement of position (SOP) would amend the Audit and Accounting Guide Audits of Investment Companies (the Guide) to provide guidance on financial reporting by investment companies for certain distribution costs. It would require that: 1. A liability for excess costs should be recognized by a fund with an enhanced 12b-1 plan when the distributor incurs distribution costs, with a corresponding charge to expense. The amount of the liability should be equal to the cumulative costs incurred by the distributor less the sum of (a) the cumulative 12b-1 fees paid to date, (b) the cumulative contingent deferred sales load (CDSL) payments to date, and (c) if reasonably estimable, future cumulative CDSL payments by current shareholders. The liability for such excess costs should be calculated based on the present value of estimated future 12b-1 plan fees payable by the fund if (a) the amount and timing of cash flows are reliably determinable, and (b) the distribution costs are not subject to a reasonable interest charge. A liability should be recorded by a fund with a board contingent plan when the fund's board commits to pay excess costs. 2. Investment companies should disclose in their financial statements (1) the principal terms of both traditional and enhanced 12b-1 plans, including plan provisions permitting or requiring payments of excess distribution costs after plan termination, and (2) for board contingent and enhanced plans, the aggregate amount of excess distribution costs subject to recovery through future payments by the fund, pursuant to the plan and current shareholders through CDSL payments. For enhanced 12b-1 plans, the fund should disclose the methodology used to estimate future CDSL payments by current shareholders.

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Mutual funds -- United States -- Accounting; Mutual funds -- Auditing -- Standards -- United States


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 statement of position : Accounting for certain distribution costs for investment companies (proposed amendment to AICPA audit and accounting guide, Audits of Investment Companies);Accounting for certain distribution costs for investment companies (proposed amendment to AICPA audit and accounting guide, Audits of Investment Companies); Exposure draft (American Institute of Certified Public Accountants), 1994, Apr. 22



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