The American Institute of CPAs has published a set of technical practice aids to help auditors and preparers understand the accounting rules on determining the fair value of investments in entities that calculate a net asset value.
The entities, often called alternative investments, include hedge, private equity and real estate funds. Technical Practice Aids Sections 2200.18-.27 offer non-authoritative implementation guidance to the Financial Accounting Standards Boards Accounting Standards Update 2009-12, Investments in Certain Entities that Calculate Net Asset Value per Share (or Its Equivalent), which is effective for reporting periods ending after Dec. 15, 2009. If certain criteria are met, the rule allows an investor, as a practical expedient, to estimate the fair value of an alternative investment on the basis of its net asset value.
We received inquiries from many companies and their auditors asking us for guidance with implementing the provisions of the FASB practical expedient rule, said AICPA technical manager of accounting standards Yelena Mishkevich in a statement.
The technical practice aids cover several issues related to the FASB rule, among them, determining whether a net asset value calculation is consistent with the FASB Codification Topic, Financial Services Investment Companies, determining whether an adjustment to net asset value is necessary, and certain disclosure considerations.
The AICPA believes the technical practice aids will be especially helpful for investment companies, banks, broker-dealers, health care companies, insurance companies and other organizations that often hold alternative investments.
The technical practice aids may be found here.
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