Recently Issued Technical Questions and Answers 


Below, the AICPA will post recent questions and answers issued since July 2016. The questions and answers in this section are not sources of established authoritative principles. This material is based on selected practice matters identified by the staff of the AICPA's Technical Hotline and various other bodies within the AICPA and has not been approved, disapproved, or otherwise acted upon by any senior committee of the AICPA. Consult AICPA Technical Questions and Answers for all technical staff questions and answers issued by the AICPA.

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Section Title Issue Date
6910.36 Determining Whether Loan Origination Is a Substantive Activity When Assessing Whether an Entity Is an Investment Company
October 2016
6910.37 Considering the Length of Time It Will Take an Investment Company to Liquidate Its Assets and Satisfy Its Liabilities When Determining If Liquidation Is Imminent
October 2016
6910.38 Determining If Liquidation Is Imminent When the Only Investor in an Investment Company Redeems Its Interest, and the Investment Company Anticipates Selling All of Its Investments and Settling All of Its Assets and Liabilities
October 2016
6910.39 Presentation of Stub Period Information by an Investment Company
October 2016
6910.40 Applying the Financial Statement Reporting Requirements in FASB ASC 946-205-45-1 When an Investment Company Presents a Stub Period
October 2016
6910.41 Separation of Final-Period Financial Statements Between Going Concern and Liquidation Periods for Certain Investment Companies That Liquidate Over a Short Period of Time
October 2016
6910.42 Presenting Financial Highlights Under the Liquidation Basis of Accounting for an Investment Company
October 2016
6910.43 Accrued Income When Using the Liquidation Basis of Accounting
October 2016

Questions and Answers

No accounting technical questions and answers have been issued since July 2016.

Auditing Questions and Answers

Section 6910.36, "Determining Whether Loan Origination Is a Substantive Activity When Assessing Whether an Entity Is an Investment Company" (Issue Date: October 2016)

Inquiry — If an entity originates loans to third parties for the purposes of maximizing its returns from capital appreciation, investment income, or both, how does the entity determine whether the loan origination activity represents a substantive activity that precludes the entity from qualifying as an investment company under FASB Accounting Standards Codification (ASC) 946-10-15-6?

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Section 6910.37, "Considering the Length of Time It Will Take an Investment Company to Liquidate Its Assets and Satisfy Its Liabilities When Determining If Liquidation Is Imminent" (Issue Date: October 2016)

Inquiry — FASB ASC 205-30-25-1 states that an entity shall prepare financial statements in accordance with the requirements of the liquidation basis of accounting when liquidation is imminent, unless the liquidation follows a plan for liquidation that was specified in the entity’s governing documents at the entity’s inception. FASB ASC 205-30-25-2 defines when liquidation is imminent based on the occurrence of events and does not include a time element. Should an investment company consider the length of time it will take to liquidate its assets and satisfy its liabilities when determining if liquidation is imminent?

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Section 6910.38, "Determining If Liquidation Is Imminent When the Only Investor in an Investment Company Redeems Its Interest, and the Investment Company Anticipates Selling All of Its Investments and Settling All of Its Assets and Liabilities" (Issue Date: October 2016)

Inquiry — When the only investor in an investment company redeems its interest, and, as a result, the investment company anticipates selling all of its investments and settling all of its assets and liabilities, should liquidation be considered imminent? Must it be anticipated that the legal entity will be dissolved in order for liquidation to be imminent?

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Section 6910.39, "Presentation of Stub Period Information by an Investment Company" (Issue Date: October 2016)

Inquiry — Should an investment company (subject to presentation of liquidation-basis financial statements) present information for the stub period, which is the period from the most recent balance sheet date to the date liquidation becomes imminent?

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Section 6910.40, "Applying the Financial Statement Reporting Requirements in FASB ASC 946-205-45-1 When an Investment Company Presents a Stub Period" (Issue Date: October 2016)

Inquiry — How should an investment company apply the financial statement presentation requirements in FASB ASC 946-205-45-1 when the investment company presents a stub period (the period of time from the most recent balance sheet date to the date liquidation becomes imminent) together with the liquidation basis financial statements?

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Section 6910.41, "Separation of Final-Period Financial Statements Between Going Concern and Liquidation Periods for Certain Investment Companies That Liquidate Over a Short Period of Time" (Issue Date: October 2016)

Inquiry — Some investment companies liquidate over a short period of time because their investments are easily traded. Financial statements for the investment company’s last fiscal period may be required to be issued under various regulatory or contractual requirements. In this circumstance, would an investment company be required to apply liquidation basis of accounting and separate the financial information for the liquidation period from the going concern period?

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Section 6910.42, "Presenting Financial Highlights Under the Liquidation Basis of Accounting for an Investment Company" (Issue Date: October 2016)

Inquiry — Should an investment company present total return or internal rate of return (IRR) after adopting the liquidation basis of accounting? Should an investment company present net investment income or expense ratios after adopting the liquidation basis of accounting?

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Section 6910.43, "Accrued Income When Using the Liquidation Basis of Accounting" (Issue Date: October 2016)

Inquiry — FASB ASC 205-30-25-7 states that an entity should accrue costs and income that it expects to incur or earn through the end of its liquidation if and when it has a reasonable basis for estimation. Would an investment company accrue income related to estimated earnings on the investments held by the investment company?

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