1 See Accounting/Treasurers Committee No. 2-00, SEC Rules Committee No. 4-00 (January, 11,
2000).
[11887]
May 16, 2000
TO: ACCOUNTING/TREASURERS COMMITTEE No. 19-00
SEC RULES COMMITTEE No. 75-00
RE: DRAFT INSTITUTE COMMENT LETTER ON FASB FAIR VALUE PROPOSAL
______________________________________________________________________________
As we previously informed you, the Financial Accounting Standards Board has
published a proposal on valuation of financial instruments.1 The proposal is the first step in
developing financial accounting guidance that would require all issuers to value their financial
instruments at fair value, with changes in value reflected in earnings. The valuation guidance
proposed by the FASB differs from SEC security valuation guidance applicable to investment
companies in certain respects. For example, the FASB proposal indicates that exchange traded
securities should be valued at the last sale price less brokerage commissions to be incurred on disposition of
the security. Further, securities traded over-the-counter should be valued at the bid price (and not
the mean of the bid-ask spread).
The attached draft comment letter argues that investment companies should be
exempted from the proposal in deference to long-standing security valuation guidance
promulgated by the Securities and Exchange Commission. If you have any comments on the
Institute’s draft comment letter please contact the undersigned by May 26 at 202/326-5851 or
smith@ici.org.
Gregory M. Smith
Director – Operations/
Compliance & Fund Accounting
Attachment