Investment Company Notebook

Practical insight and analysis on the accounting, audit and tax issues impacting investment companies.

Can Funds Use Equalization Debits and In-Kind Redemptions Together For Tax Efficiency?

Posted by admin Aug 5, 2014 4:26:00 PM

In order to achieve tax efficiency and maintain the single layer of taxation concept of Subchapter M, regulated investment companies (RICs) use various techniques. Two common techniques in the industry are equalization debits and the use of redemptions in-kind instead of cash redemptions. ETFs tend to use in-kind redemptions more than non-ETF groups.

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Shortening the U.S. Trade Settlement Cycle | BBD, LLP

Posted by admin Jun 17, 2014 3:27:00 PM

In a recent report published by the Depository Trust & Clearing Corporation (DTCC) in April of 2014, a recommendation was made to shorten the U.S. Trade settlement cycle for equities, municipal and corporate bonds and unit investment trusts from trade date plus three days (T+3) to trade date plus two days (T+2).

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Don't Let SADs Get You Down

Posted by admin Jun 3, 2014 12:06:00 PM

One of the more potentially divisive items included in the Auditor’s Report to the Audit Committee is the Summary of Audit Differences (SADs). At times, it seems that SADs are perceived as a black mark on an otherwise clean audit report, which is most likely due to a misunderstanding of what a SAD represents.

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Are We Any Closer to IFRS Adoption?

Posted by admin May 15, 2014 11:03:00 AM

The buzz surrounding International Financial Reporting Standards (IFRS) adoption in the United States, once a hot topic, has waned significantly in the past few years.

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How to Account for Commission Recapture Program Rebates

Posted by admin Apr 29, 2014 3:02:08 PM

Commission recapture occurs when a fund enters into an agreement with an institutional broker to rebate a portion of trading commissions directly to a fund. How does commission recapture work?

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Treatment of Organization and Offering Costs For New Open-End Funds

Posted by admin Apr 15, 2014 6:42:01 PM

Through our interaction with various clients, it has become clear there is much uncertainty with respect to the identification and treatment of organization and offering costs as they relate to a newly established open-ended mutual fund. In hopes of providing clarification on this matter, we have illustrated the accounting treatment of both types of costs in several different scenarios through which they may apply.

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What You Need To Know About Proposed Changes to the Auditors' Reporting Model

Posted by admin Oct 11, 2013 3:06:44 PM

Late this summer, the Public Company Accounting Oversight Board (PCAOB) released for public comment drastic changes to the auditors’ reporting model. These changes would be accomplished through two new auditing standards. The first proposed auditing standard- The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion- establishes requirements regarding the content of the auditor’s written report. The second proposed auditing standard- The Auditor’s Responsibilities Regarding Other Information in Certain Documents Containing Audited Financial Statements and the Related Auditor’s Report- establishes requirements regarding the auditor’s responsibilities with respect to information, other than the audited financial statements and the related auditor’s report, in a company’s annual report that is filed with the SEC under the Securities Exchange Act of 1934 and contains that company’s audited financial statements and the related auditor’s report.

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IRS Form 8937- Reporting Corporate Actions

Posted by admin Aug 8, 2013 1:59:47 PM

Starting in 2012, Regulated Investment Companies (“RIC’s”) are required to file Form 8937 to report corporate actions that affect the basis of the RIC stock. Such corporate actions include, but are not limited to, mergers, stock splits, spin-offs, return of capital distributions, etc.

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Determination of an NAV Error When the Net Asset Value Reported on the Financial Statements Differs From Published Values

Posted by admin Jul 10, 2013 4:31:00 PM

For starters, the regulatory provisions relating to net asset value (“NAV”) can be found in the rules adopted under the Investment Company Act of 1940, in particular, Rules 2A-4 and 22c-1. A few notable excerpts from these two rules are as follows:

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The Clarity Project Makes Changes to Auditor's Report for US GAAS Audits

Posted by admin Apr 22, 2013 5:41:36 PM

At the same time the convergence of US accounting standards with International Financial Reporting Standards (IFRS) was taking place, the Auditing Standards Board (ASB) was conducting the Clarity Project. The Clarity Project is intended to revise and re-codify US generally accepted auditing standards (US GAAS) to make auditing standards easier to read, understand and implement in practice, while at the same time converging US GAAS with the International Auditing and Assurance Standards Board of the International Federation of Accountants.

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