[14189]
November 27, 2001
TO: ACCOUNTING/TREASURERS COMMITTEE No. 34-01
INTERNATIONAL COMMITTEE No. 61-01
RE: IASB CONFIRMS INTERPRETATION TREATING FUND SHARES AS LIABILITIES
The Standing Interpretations Committee of the International Accounting Standards
Board recently confirmed 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.
Notwithstanding comments by the Institute1 and others, the interpretation concludes that fund
shares are liabilities since they enable the holder to redeem or “put” the shares to the issuer for
cash. As a result of this interpretation, entities that issue redeemable shares will report no
equity or net assets for financial accounting purposes.
The interpretation has no effect on U.S. registered investment companies, which are
subject to U.S. generally accepted accounting principles. Several European countries currently
permit, but do not require adoption of international accounting standards. The European
Commission recently issued a proposal that would require adoption of international accounting
standards by companies listed in European Union member states for fiscal years starting on or
after January 1, 2005.
We will keep you informed of developments.
Gregory M. Smith
Director – Operations/
Compliance & Fund Accounting
1 See Memorandum Accounting/Treasurers Committee No. 32-01 (November 5, 2001).