[12814]
November 1, 2000
TO: TAX COMMITTEE No. 46-00
RE: PAPER ON MANDATORY PREMIUM AMORTIZATION
Attached is a paper prepared by the Institute’s Accounting Policy Subcommittee
addressing accounting and financial reporting issues associated with mandatory amortization
of premium and discount on fixed-income securities. As you know, the revised AICPA
Investment Company Audit Guide requires amortization of premium and discount on fixed-
income securities for financial accounting purposes. The revised Audit Guide was cleared by the
FASB on May 31. The revised Audit Guide will be effective for fiscal years beginning after
December 15, 2000.
The paper is intended to assist those fund firms that do not currently amortize premium
and discount on fixed-income securities implement the change in accounting policy. Among
other things, the draft paper addresses financial statement disclosures, tax considerations,
implementation strategies and the cumulative “catch up” adjustment. Questions or comments
on the paper should be directed to the undersigned or to a member of the Accounting Policy
Subcommittee.
Gregory M. Smith
Director – Operations/
Compliance & Fund Accounting
Attachment (in .pdf format)