Investment Companies, 2019

Appendix E Illustrative Financial Statement Presentation for Tax-Free Business Combinations of Investment Companies

This appendix is nonauthoritative and is included for informational purposes only.

The following financial statements and disclosures illustrate a tax-free business combination of investment companies (discussed in chapter 8, “Other Accounts and Considerations,” of this guide), as illustrated in Technical Questions and Answers (Q&A) section 6910.33, “Certain Financial Reporting, Disclosure, Regulatory, and Tax Considerations When Preparing Financial Statements of Investment Companies Involved in a Business Combination.”¹ The illustrative notes are unique to a business combination. The exhibits assume that Fund B merges into Fund A as of the close of business on December 31, 20X4, and that both Fund A and Fund B have a January 31 fiscal year-end. Exhibit 1 presents the financial position of each fund immediately before the acquisition and the combined fund immediately after the acquisition. Exhibit 2 presents the results of operations and changes in net assets of each fund for the 11-month fiscal period immediately before the acquisition and the results of operations and summary changes in net assets information for the combined fund for the 1 month period subsequent to the acquisition. Exhibit 3 presents the statement of operations, statement of changes in net assets, and appropriate notes of the combined entity immediately after the acquisition. (The January 31, ...