February 6, 1989
TO: CLOSED-END FUND COMMITTEE NO. 3-89
SEC RULES COMMITTEE NO. 10-89
UNIT INVESTMENT TRUST COMMITTEE NO. 5-89
ACCOUNTING/TREASURERS COMMITTEE NO. 9-89
INDEPENDENT ACCOUNTANTS ADVISORY GROUP
RE: FASB AGREES ON LANGUAGE OF FINAL STATEMENT AMENDING
SFAS NO. 95
__________________________________________________________
The second vote by the Financial Accounting Standards Board
(FASB) regarding the issuance of a final statement amending SFAS
No. 95, Statement of Cash Flows, was concluded on Friday,
February 3. (See Memorandum to Accounting/Treasurers Committee
No. 7-89, Closed-End Fund Committee No. 2-89, SEC Rules Committee
No. 7-89, and Unit Investment Trust Committee No. 3-89.) The
final statement is expected to be published by the FASB on
February 10 or very shortly thereafter.
The Institute has been informed by the FASB staff that the
final statement will exempt from SFAS No. 95, investment
companies that are registered under the Investment Company Act of
1940 and investment companies having essentially the same
characteristics as '40 Act registrants that meet the following
conditions:
a. Substantially all investments were highly liquid.
b. Substantially all investments were carried at market
value.
c. There was little or no debt based on average debt
outstanding during the period in relation to average
net assets during the period.
d. The company provides a statement of changes in net
assets.
Please note the following changes in the exemption criteria
from the Exposure Draft (ED) of the final statement (See
Memorandum to Closed-End Fund Committee No. 36-88, SEC Rules
Committee No. 78-88, Unit Investment Trust Committee No. 40-88,
and Accounting/Treasurers Committee No. 46-88.) Condition a. in
the ED stated that "the enterprise's assets consist predominantly
-2-
of cash, securities, and similar assets for which a market is
readily available." That condition has been modified in
condition a. above to require that substantially all investments
were highly liquid. Condition b. above has been added.
Condition c. above clarifies the ED by providing that average
debt outstanding be considered in relation to average net assets.
Footnotes in the final statement will clarify that (1)
investments carried at "market value" include securities valued
by a matrix pricing model but exclude securities whose fair
values are estimated in accordance with good faith determinations
of the board of directors, and (2) any extensions of credit by
sellers not in accordance with standard industry practices for
redeeming shares or settling purchases of investments are
included in "debt." The FASB staff has indicated its agreement
that "when issued" and "delayed delivery" transactions are
standard industry practices.
We will keep you advised of further developments.
Donald J. Boteler
Director of Operations/
Fund Accounting