ICI Comments on FASB's Proposed Fair Value Requirements

Washington, DC, September 8, 2004 - The Institute supports recent efforts by the Financial Accounting Standards Board (FASB) to improve financial statements prepared by all companies, including investment companies, using generally accepted accounting principles (GAAP), but recommends the effort acknowledge existing SEC requirements that apply to investment companies.

Background
In July 2004, FASB issued an exposure draft of a proposed accounting standard entitled Fair Value Measurements, which would amend GAAP and would apply to all entities that prepare GAAP-based financial statements, including investment companies. Among other things, the FASB proposal would require financial statement footnote disclosure of the dollar amount of securities valued by reference to:

The proposal would be effective for fiscal years beginning after June 15, 2005.

ICI Comments
The Institute supports FASB's efforts to provide guidance on fair-value measurements and supplement historical cost-based financial reporting with disclosure of fair-value amounts, but in a recent comment letter, also urges FASB to align its fair-value requirements with those already in force by the SEC.

The Institute states that SEC-registered investment companies are subject to extensive regulation, including the manner in which they value their securities holdings, both for purposes of calculating daily net asset values and preparing financial statements. The Institute also notes that, in certain instances, the FASB proposal conflicts with SEC valuation requirements applicable to registered funds and, if the proposal is adopted in its current form, certain registered funds could not concurrently comply with both SEC valuation requirements and the FASB standard.

The Institute urges FASB to resolve these conflicts by conforming the proposal to SEC valuation requirements, or acknowledge that as to conflicts, registered funds should refer to applicable SEC standards.

The Institute also states that the proposed disclosures are unnecessary for registered funds, since they currently provide extensive financial statement and prospectus disclosure regarding their security valuation policies.

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