The American Institute of CPAs’ (AICPA) Financial Reporting Executive Committee (FinREC) has provided a number of recommendations relating to certain financial reporting matters affecting money market funds in response to the Securities and Exchange Commission’s (SEC) proposed rule, Money Market Fund Reform; Amendments to Form PF.
In its Sept. 16, 2013 comment letter, FinREC agreed with the SEC that U.S. GAAP would not preclude a money market fund with a floating NAV or the ability to impose liquidity fees and gates from being classified as a cash equivalent. FinREC noted that conclusions reached by the Commission about the classification of a money market fund for financial reporting would affect all institutional investors, impacting not only SEC registrants, but non-public entities as well, including certain entities that follow standards established by an accounting standards board other than the FASB. For purposes of clarity and broad understandability, FinREC recommended that the SEC request the FASB codify the SEC’s views on the classification of a money market fund as a cash equivalent, and consider other accounting standard setters that should document the relevant views in that accounting framework.
FinREC also expressed the view that the SEC should not require disclosure of sponsor financial statements when an explicit guarantee does not exist and offered several suggestions for purposes of amending Form N-1A relating to money market funds.
In addition, FinREC asked the Commission to consider providing, either in the final release or through supplemental guidance, commentary regarding various financial reporting matters that may arise in the preparation of the financial statements and the notes thereto as a result of adopting such proposals.