AICPA WAIVES STATEMENT OF CASH FLOWS FOR SHORT SALES AND OPTIONS IF PROCEEDS ARE KEPT IN CASH

AICPA has issued a Technical Practice Aid indicating that an investment company (registered or unregistered) may not need to provide a statement of cash flows even when entering into certain investment transactions that would otherwise be classified as debt. AICPA explained that transactions such as short sales, options, mortgage dollar rolls, and securities lending, although presented as liabilities, would not give rise to an obligation to deliver a statement of cash flows so long as the investment company enters into the transactions for operating purposes or as an investing strategy and the investment company retains the proceeds in cash or cash equivalents. Separately, AICPA also provided guidance for unregistered funds on the treatment of deferred fees and reporting of separate series.

OUR TAKE: This guidance will avoid the unnecessary burden of providing a statement of cash flows where a fund engages in the above-described transactions for investing purposes without the intention of leveraging the portfolio.

http://www.aicpa.org/download/acctstd/TIS6910_25_28.pdf