December 18, 1995
TO: ACCOUNTING/TREASURERS MEMBERS No. 57-95
INDEPENDENT ACCOUNTANTS ADV. GROUP No. 10-95
RE: ICI WHITE PAPER ON FOREIGN CURRENCY EXCHANGE CONTRACTS
______________________________________________________________________________
The Accounting Policy Subcommittee of the InstituteGs Accounting/Treasurers Committee
previously distributed a white paper on Foreign Currency Exchange Contracts (see
Accounting/Treasurers Members No. 51-95 dated November 8, 1995). The white paper includes a
discussion of federal tax considerations for foreign currency exchange contracts on page 9. The paper
indicates that open forward contracts on 1256 currencies should be marked to market at year end and
that the unrealized capital gain or loss should be treated as 60% long term and 40% short term.
The attached clarifies that the year end mark to market gain or loss on open forward contracts
on 1256 currencies should be treated as ordinary income for tax purposes rather than capital gain or
loss. Please substitute the attached page 9 for the page 9 included in the previous version.
Gregory M. Smith
Director - Operations/
Compliance & Fund Accounting
Attachment