Round table explores investment company proposals

Questions arose about the scope and substance of accounting standards proposals on investment companies Friday during a round-table meeting sponsored by FASB and the International Accounting Standards Board (IASB).

The meeting, which was held in Toronto, was the first of four public meetings to discuss the FASB and IASB proposals. FASB has outlined its proposed changes within Accounting Standards Update, Financial Services—Investment Companies (Topic 946): Amendments to the Scope, Measurement and Disclosure Requirements. The IASB exposure draft is called Investment Entities.

The FASB ED changes the entities that would be considered investment companies and alters certain disclosure and presentation requirements. A goal of the ED is to improve the comparability between entities considered investment companies under U.S. GAAP and those considered investment entities under amendments the IASB has proposed to IFRS.

Topics discussed by participants in Friday’s round table included:

• If entities, including those associated with real estate, are captured by the proposal even though they shouldn’t be considered investment entities.
• Whether an investment entity should be permitted to hold a single investment, and whether entities with a single investor unrelated to the fund manager should be considered an investment entity.
• The retention of fair value accounting by a noninvestment entity parent of an investment entity subsidiary. The IASB’s proposal would not permit a noninvestment entity parent to retain the fair value accounting used by an investment entity subsidiary. Under current and proposed U.S. GAAP, a noninvestment entity parent would retain the fair value accounting used by the investment entity subsidiary in its consolidated financial statements.

Other meetings will be held Feb. 29 at the IASB office in London; March 16 at the FASB office in Norwalk, Conn.; and March 27 at the Malaysian Accounting Standards Board office in Kuala Lumpur.

—Ken Tysiac ( ktysiac@aicpa.org ) is a JofA senior editor.

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