Investment Companies, 2019

Chapter 3 Financial Instruments

3.01 This chapter provides brief descriptions of certain financial instruments of investment companies. Consideration should be given to FASB Accounting Standards Codification (ASC) 815, Derivatives and Hedging; 820, Fair Value Measurement; 460, Guarantees; and 860, Transfers and Servicing, in connection with accounting and financial statement presentation for these financial instruments.

Money Market Investments

3.02 Short term investments, such as short term government obligations, commercial paper, bankers’ acceptances, and certificates of deposit (CDs), may be bought at their face amount or a discount or premium from their face amount.

3.03 Funds may value money market investments that mature within a relatively short period (for example, 60 days) at amortized cost, which often approximates fair value. However, the impairment of the credit standing of the issuer or unusual changes in interest rates can affect their fair value significantly. In those circumstances, amortized cost may not approximate the fair value of such investments.

3.04 SEC Release No. 33-9616, Money Market Fund Reform; Amendments to Form PF, provides guidance on the use of amortized cost for valuation. Registered investment companies and business development companies (BDCs) may use amortized cost to value debt securities with remaining maturities of 60 days or less if fund directors, in good faith, determine that the fair value of the debt securities is their amortized ...