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Wiley GAAP 2008 by Colorado Steven M. Bragg Englewood, Ralph Nach American Express Tax and Business Inc., Barry J. Epstein

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Concepts, Rules, and Examples

Several types of investment companies exist: management investment companies, unit investment trusts, collectible trust funds, investment partnerships, certain separate accounts of life insurance companies, and offshore funds. Management investment companies include open‐end funds (mutual funds), closed‐end funds, special purpose funds, venture capital investment companies, small business investment companies, and business development companies.

All of the investment companies mentioned have the following characteristics:

  1. Investment activity—Investing in assets, usually in securities of other entities, for current income, appreciation, or both.

  2. Unit ownership—Ownership in the investment company is represented by stock or other units of ownership, to which proportionate shares of net assets can be attributed.

  3. Pooling of funds—The funds of the investment company owners are pooled together to take advantage of professional investment management.

  4. Reporting entity—The investment company is the primary reporting entity.

Accounting Policies

The accounting policies for an investment company result from the company's role as a vehicle through which investors can invest as a group. These policies are largely governed by the SEC, Small Business Administration, and specific provisions of the Internal Revenue Code relating to investment companies.

Investment companies report all investment securities at market value, or if quoted market values are not available, ...

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