[14108]
November 5, 2001
TO: ACCOUNTING/TREASURERS COMMITTEE No. 32-01
RE: ICI COMMENT LETTER ON IASB INTERPRETATION ON FUND SHARES
The Institute recently filed the attached comment letter with the International
Accounting Standards Board in response to its request for comment on Interpretation SIC – D34
Financial Instruments – Instruments or Rights Redeemable by the Holder. The interpretation
addresses the financial statement presentation of shares issued by unit trusts, open-end mutual
funds and other investment enterprises. The interpretation indicates that where shares enable
the holder to redeem or “put” the shares to the issuer for cash, the issuer should treat the shares
as a liability. The interpretation would cause these entities to report no equity or net assets for
financial accounting purposes.1
The Institute’s comment letter opposes the interpretation. The comment letter suggests
that the interpretation mischaracterizes fund shares as deposits, ignores ownership rights
associated with fund shares, and fails from a cost/benefit perspective. The comment letter
supports the approach taken by the FASB’s exposure draft Accounting for Financial Instruments
with Characteristics of Liabilities, Equity, or Both, which concludes that fund shares are equity.
Gregory M. Smith
Director – Operations/
Compliance & Fund Accounting
Attachment
Attachment (in .pdf format)
1 The interpretation would have no effect on U.S. registered investment companies, which are subject to U.S.
generally accepted accounting principles.