The Financial Accounting Standards Board (FASB) voted to drop a requirement for private fund managers to disclose information about investments in other funds.
The US accounting standard setter voted 4:3 in favor of dropping the disclosure obligation in light of concerns raised by external stakeholders in a draft of the proposed accounting standards update: Financial Services – Investment Companies (Topic 946): Disclosures about Investments in Other Investment Companies.
The main beneficiaries of the removed disclosure requirements are fund of funds managers who were required to report information on their underlying fund investments. The news will also be welcome to GPs who set up intermediary fund structures for debt financing or fund structures that act as “blockers” in a portfolio investment.
However FASB decided not to drop a requirement for GPs to report all their master fund financial statements in their feeder fund accounting, a decision that was tentatively made a year ago.
“In practice, most [GPs] already do this, but they’re still mulling the requirement as its only optional in GAAP [accounting standards] for private funds,” said a source close to FASB.
The board must also still decide whether private funds should disclose information on the underlying investments of any fund they invest in that exceeds 5 percent of the fund’s net assets.
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