Attention FAE Customers:
Please be aware that NASBA credits are awarded based on whether the events are webcast or in-person, as well as on the number of CPE credits.
Please check the event registration page to see if NASBA credits are being awarded for the programs you select.

Want to save this page for later?


Press Release

NYSSCPA to FASB: More Clarification Needed on Proposed Investment Company Accounting Guidelines

Lois Whitehead
Published Date:
Feb 16, 2012
New York, NY, February 16, 2012 – The New York State Society of Certified Public Accountants (NYSSCPA) expressed its support of two Financial Accounting Standards Board (FASB) proposed Accounting Standards Updates (ASU), but wants to see more clarification written into one of the proposals before the guidelines are implemented.
The first proposal, Financial Services—Investment Companies (Topic 946) Amendments to the Scope, Measurement, and Disclosure Requirements, is intended to develop consistent criteria for determining whether an entity is an investment company, but the Society believes more clarification on certain aspects of the proposal is necessary.
In its comment letter sent to the FASB last week, the NYSSCPA noted its agreement in principle with the proposed update, but expressed concern over the lack of clarity.
“On the whole we were in agreement with the board’s proposal,” said Craig Goodman, member of the NYSSCPA’s Financial Accounting Standards Committee and one of the letter’s principal drafters. “We did feel that there were some certain aspects that needed additional clarification.”
The response letter notes that there are portions of the proposal which could result in significant changes, possibly unanticipated, to current industry practice and require additional guidance or clarification should they be implemented without additional clarification.
One of the portions of the update the NYSSCPA would like more clarification on is the proposed amendments requiring an entity to meet six different criteria in order to qualify as an investment company. One of those criteria is that the entity can be, but does not need to be, a legal entity.
“If the reporting entity is not a legal entity and does not have a form of legally defined units or partnership interests, it becomes unclear how such unit ownership is determined and evidenced,” the response letter states.
The NYSSCPA asked the board to provide additional guidance on this and other matters, including having the FASB provide a clear definition of what it means by “controlling financial interests” for consolidation purposes in a fund-of-funds structure.
The NYSSCPA does support many of the updated guidelines, including one that would require an entity to reassess whether it is an investment company, if there is a change in the purpose and design of the entity.
In regards to implementing the first set of proposed amendments, the NYSSCPA believes companies should be able to change agreements, obtain required financial statements, modify charts of accounts and put controls in place within one year to 18 months and that the implementation date should be at the beginning of a fiscal year.
The NYSSCPA agrees with the FASB that early adoption of these amendments should be prohibited in order to allow for consistency of presentation and eliminate the possibility of confusion by an investor in more than one investment company if he or she receives statements on a different basis.
In a separate comment letter sent to the FASB regarding proposed ASU Real Estate—Investment Property Entities (Topic 973), the NYSSCPA also expressed its supports for the update, as it would clarify if an entity is a real estate investment entity.
J. Roger Donohue, NYSSCPA Financial Accounting Standards Committee chair and one of the comment letter’s principal drafters, stated that the objective of the proposed updates is to achieve consistency with respect to accounting for real estate investment property entities.
“The [FASB] asserted that the accounting rules were not being consistently applied,” Donohue said. “The FASB is trying to provide guidance so everyone is on the same page.”
One of the main points the NYSSCPA supports is the requirement that an investment property entity have an “exit strategy” to dispose of its real estate property or properties to realize capital appreciation to maximize total return.
“When you have an investment, you buy it with the intent to sell it at some point down the line,” Donohue said.
The NYSSCPA agrees with the proposed ASU that only entities that meet the criteria of real estate investment property entities be required to measure their investments at fair value.
The NYSSCPA does not believe early adoption would have a negative effect on the implementation of these guidelines, but does feel both ASUs should be implemented at the same time along with the Principal versus Agent proposed amendments that are also currently being reviewed.
Members of the NYSSCPA’s Financial Accounting Standards Committee, Accounting & Auditing Oversight Committee and Investment Companies Committee jointly assessed the proposals. Their response was sent to the FASB on February 10. The open comment period for this proposal closed on February 15.
About the NYSSCPA
Representing more than 28,000 CPAs, the NYSSCPA was the first state accounting organization in the nation. Incorporated in 1897, the Society is a not-for-profit organization that seeks to establish and maintain high standards of integrity, honor, and character among certified public accountants.
The New York State Society of CPAs is located at 3 Park Avenue in New York City. To learn more about the Society call 800-633-6320 or visit the Society’s website at