The following is based on an extract from the online course US GAAP Fund Financial Statements Part 2. Interim financial statements are not required under US GAAP. But, a fund may be required to prepare and file interim financial statements with a regulator or stock exchange. This is usually for the first six months of the fund’s accounting year. If the funds interim financial statements are prepared under US GAAP they must comply with all relevant US GAAP requirements, including any requirements specifically for interim financial statements.
It should also be clearly stated whether the interim financial statements are audited or unaudited.
It is permitted that interim financial statements are produced in a summarized or condensed format, that is, they do not have to show all of the information and disclosures that are included in a full annual set of financial statements. Condensed information must be clearly identified as such. A full set of financial statements can be prepared for an interim period, if this is preferred.
Summarized financial statements: minimum disclosures
If summarized interim financial statements are prepared, certain minimum information must be included:
Income
Net Income
Contingent items
Fair value disclosures
Derivatives disclosures
Debt and equity security disclosures
Changes in accounting principles or estimates
Significant changes in financial position
Disclosures regarding contingent items, fair value, derivatives and debt and equity securities are discussed elsewhere in the online course US GAAP Fund Financial Statements.
Summarized financial statements: encouraged disclosures
If summarized interim financial statements are prepared, inclusion of the following is also encouraged:
Statement of assets and liabilities
Statement of cashflows
Changes in accounting policies
Changes in accounting policy in an interim period from any of the following must be disclosed: changes since
The comparable interim period of the prior year
The preceding interim period of the current year (if any)
The prior annual period.
For example: The financial statements of Allegro Fund Ltd for the six months ended 30th June 2017 must disclose changes in the funds accounting policies since:
The financial statements for the year-ended 31st December 2016 and
The financial statements for the six months ended 30th June 2016
Changes in accounting estimates
The effect of any changes in accounting estimates during the period on the interim financial statements should be separately disclosed.
Income
Income should be recognized and reflected in the statement of operations on the same basis as is used for the annual financial statements. For example: recognizing dividends on their ex-date
Expenses
Expenses are recognized and reflected in the statement of operations, so as to reflect an appropriate allocation of the expense to the interim period. The calculation of an expense charge will depend on the type of expense:
Expenses incurred in the period: such as management fees, and
Expenses accrued which will be paid later in the year: for example 50% of the annual audit fee charge is accrued in the interim financial statements for a 6 month period
Expenses should not be allocated to an interim period on an arbitrary basis, and the allocation method used should be consistent with that used for the annual financial statements.
Key Points
Interim financial statements are not required under US GAAP.
If interim financial statements are prepared for a fund that applies US GAAP they must be in compliance with all relevant US GAAP requirements.
It is permitted to prepare summarized or condensed interim financial statements.
The accounting policies used in the interim financial statements should be same as used for annual financial statements.
Changes in accounting policies and in accounting estimates should be disclosed.
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