Wiley GAAP 2013: Interpretation and Application of Generally Accepted Accounting Principles

1. Substantially all of the entity’s investments were highly liquid.

2. The entity’s investments are carried at market value.

3. The entity had little or no debt, based on average debt outstanding during the period, in relation to average total assets.

4. The entity provides a statement of changes in net assets.

Taxes

Investment companies that distribute all taxable income and taxable realized gains qualifying under Subchapter M of the Internal Revenue Code are not required to record a provision for federal income taxes. If the investment company does not distribute all taxable income and taxable realized gains, a liability should be recorded at the end of the last day of the taxable year. The rationale for recording on the last day of the year is that only shareholders of record at that date are entitled to credit for taxes paid.

Commodity Pools

ASC 946-210 stipulates that investment partnerships which are commodity pools subject to regulation by the CFTC are subject to its guidance. Thus, notwithstanding the rapid turnover common among such pools, the financial statements must include a schedule of investments.

Other Accounting Guidance

ASC 946-320 concludes that for PIK and step bonds, (1) the effective-interest method should be used to determine interest income; (2) a reserve against income should be established for interest income not expected to be realized; (3) the cost plus any discount should not exceed undiscounted future cash collections; (4) SEC yield-formula ...