Project Update

Investment Companies: Disclosures about Investments in Another Investment Company

Last updated on April 8, 2014.  Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Updated sections are indicated with an asterisk *)

The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.

Project Objective
*Decisions Reached at Last Meeting
*Summary of Decisions Reached to Date
*Next Steps
*Board/Other Public Meeting Dates
Background Information
Contact Information

Project Objective

The objective of this project is to require disclosures in an investment company’s financial statements that will provide transparency into the risks, returns, and expenses of an investee that is also an investment company.

*Decisions Reached at Last Meeting

The Board discussed the path forward on the project in light of concerns raised by external reviewers on a draft of the proposed FASB Accounting Standards Update, Financial Services—Investment Companies (Topic 946): Disclosures about Investments in Other Investment Companies.

The Board decided not to require disclosure of information about investments in another investment company.

The Board will determine at a future meeting whether to issue a proposed Update on the following remaining tentative decisions:
  1. A feeder fund should attach the master fund’s financial statements along with its financial statements.
  2. All investments companies (regulated and nonregulated) should disclose each investment owned by an investee fund that exceeds 5 percent of the reporting investment company’s net assets at the reporting date.

*Summary of Decisions Reached to DatE (AS OF April 4, 2014)

Investments Held by an Investee Fund

All investments companies (regulated and nonregulated) would be required to disclose information about each investment owned by an investee that exceeds 5 percent of the reporting investment company’s net assets at the reporting date, consistent with the requirements in paragraph 946-210-50-9.

Master-Feeder Structures

In a master-feeder structure, a feeder fund would be required to attach the master fund’s financial statements along with its financial statements.

Transition

The requirements would be applied prospectively with early adoption permitted.

*Next Steps

The Board will determine at a future meeting whether to proceed with issuance of a proposed Accounting Standards Update.

*Board/Other Public Meeting Dates

The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.

*April 4, 2014 Board Meeting—Decisions about the path forward in light of concerns raised by external reviewers.
October 23, 2013 Board Meeting —Decisions about scope, disclosure requirements, applicability to interim periods, and transition
March 13, 2013 Board Meeting—Decisions about the next steps.
Summary of Outreach
January 23, 2013 FASB Board Meeting—Decisions about the threshold and “as of” date for disclosures
August 29, 2012 Board Meeting—Decisions about disclosures requirements

Background Information

During its deliberations on the joint investment companies project, the Board became concerned about transparency into the risks of an investee fund to which the investors in the reporting investment company have economic exposure. As part of that joint project, in October 2011, the FASB issued proposed Accounting Standards Update, Financial Services—Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The Exposure Draft would have required an investment company to consolidate controlling financial interests in another investment company in a fund-of-funds structure.

Stakeholders strongly disagreed with the consolidation requirement in that Exposure Draft. Many of those constituents stated that the Board’s concerns regarding transparency could be addressed through disclosures about investee funds in the notes to the financial statements. Stakeholders also stated that disclosures about investments that are significant to the reporting investment company’s net assets and not just those investee funds that are controlled would provide more decision useful information for investors. In light of the feedback received, the Board decided to develop disclosures about investments in another investment company.

Contact Information

Upaasna Laungani
Project Manager
ulaungani@fasb.org

Jeff Pooley
Postgraduate Technical Assistant
jwpooley@fasb.org