The Financial Accounting Standards Board has codified an approach for determining whether a company is an investment company for accounting purposes, which determines when an entity must record all of its investments at fair value.
The approach is not significantly different from practice that has established over many years following non-authoritative professional guidance, says Jonathan Waterman, an audit partner and practice leader for business development companies at McGladrey. The American Institute of Certified Public Accountants has published audit guides and statements of position over the years, but FASB had not until now codified any of that guidance into authoritative accounting literature. “There was some wiggle room in interpretation by practitioners as to what is an investment company and what is not,” he says. “Now this gives us something authoritative.”
