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FASB Statement No. 12, Accounting for Certain Marketable Securities FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities ISSUE



Savings and loan associations and savings banks are permitted to invest in certain open-end mutual funds to meet their liquidity requirements. Those mutual funds invest only in obligations of or obligations guaranteed by the U.S. government or its agencies with maturities of five years or less. Under Statement 12, an investment in a marketable equity security is reported at the lower of cost or market. If the underlying government securities are instead owned directly by the financial institution and it has the ability and intent to hold the securities to maturity, the assets are reported at amortized cost. The issue is what basis the financial institution should use to report its investment in the mutual fund. EITF DISCUSSION The Task Force reached a consensus that the financial institution should report its investment in the mutual fund at the lower of cost or market following Statement 12. [Note: See STATUS section.] By investing in a mutual fund, the financial institution does not have the ability to control whether the underlying securities in the fund are held to maturity. Copyright © 1986, Financial Accounting Standards Board Not for redistributio

Year: 1986
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