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FASB issues amendments for investment companies

  • FASB (US Financial Accounting Standards Board) Image

Jun 07, 2013

The FASB has issued Accounting Standards Update (ASU) No. 2013-08, "Financial Services — Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements." The ASU clarifies the characteristics for determining whether a public or private company is an investment company and sets measurement and disclosure requirements for an investment company.

The main provisions in this ASU are:

1. Change the approach to the investment company assessment in Topic 946, clarify the characteristics of an investment company, and provide comprehensive guidance for assessing whether an entity is an investment company

2. Require an investment company to measure noncontrolling ownership interests in other investment companies at fair value rather than using the equity method of accounting

3. Require the following additional disclosures: (a) the fact that the entity is an investment company and is applying the guidance in Topic 946, (b) information about changes, if any, in an entity’s status as an investment company, and (c) information about financial support provided or contractually required to be provided by an investment company to any of its investees.

On convergence with IFRSs, the ASU guidance is generally similar to the IASB's Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27); however, differences exists in certain characteristics, scope, and the accounting and reporting requirements. The FASB states, “The guidance under IFRS requires a controlled investee to be present for a company to be eligible for the investment entity exception to consolidation guidance. In contrast, longstanding U.S. GAAP has provided comprehensive accounting and reporting guidance for investment companies.”

The ASU is effective for fiscal periods beginning after December 15, 2013.

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