DIVISION OF 

TRADING AND MARKETS 

Dear Mr. 

COMMODITY FUTURES TRADING COMMISSION 

2033 K STREET, N.W., WASHINGTON, D.C. 20581 

(202) 254-8955 

(202) 254-6265 FACSIMILE 

71G-822·9327 TELEX 

October 18, 1989 

This is in response to your letter, dated September 18, 

1989, to Mr. Henry Matecki of the Commission's Chicago office. 

Your letter states that Commission regulation 4.22(c)(4) which 

requires commodity pools to include a statement of changes in 

financial position in the annual report differs with generally 

accepted accounting principles ("GMP") and Statement of 

Financial Accounting Standards ("SFAS") Nos. 95 and 102 issued by 

the Financial Accounting Standards Board. 

SFAS No. 95 requires that a statement of cash flows be 

included as part of a full set of financial statements. The 

statement of cash flows replaces the requirement for a statement 

of changes in financial position. SFAS No. 102 exempts certain 

enterprises from the requirement to include the statement of cash 

flows, if each of the conditions specified in SFAS No. 102 is 

met. It exempts: 

a. an investment company that is subject to the 

registration and regulatory requirements of the 

Investment Company Act of 1940 (1940 Act); 

b. an investment enterprise that has essentially the same 

characteristics as an investment company subject of the 

1940 Act; and 

c. a common trust fund, variable annuity account, or 

similar fund maintained by a bank, insurance company, 

or other enterprise in its capacity as trustee, 

administrator, or guardian for the collective 

investment and reinvestment of moneys. 

Under FASB No. 102, the entities specified above are not 

required to include a statement of cash flows as part of a 
Page 2 

comple~e set of financial reports, provided they meet all of the 

following conditions: 

a. during the period, substantially all of the 

enterprise's investments were highly liquid (for 

example, marketable securities and other assets for 

which a market is readily available); 

b. substantially all of the enterprise's investments are 

carried at market value; 

c. the enterprise had little or no debt, based on average 

debt outstanding during the period, in relation to its 

average total assets; and 

d. the enterprise provides a statement of changes in net 

assets. 

The Division has concluded that most commodity pools would 

meet all four of the conditions specified, similarly to an 

investment company subject to the Investment Company Act of 1940, 

which is specifically exempted. Accordingly, the Division has 

further concluded that it would be appropriate to take a 

"no-action" position respecting the non-inclusion by a commodity 

pool operator of the cash flows statement in its pool's annual 

report, unless for some reason the pool did not meet all four of 

the conditions. (For a complete explanation of the conditions, a 

commodity pool operator should review SFAS No. 102.) 

Accordingly, provided all four of the conditions specified 

in SFAS No. 102 are met, the Division will take no act~on against 

a commodity pool operator for failing to include in an annual 

report filed with the Commission a statement of cash flows or a 

statement of changes in financial position. The Division 

believes that commodity pool operators should, on their own, be 

able to assess whether or not there is any reason why they would 

not meet the applicable conditions and qualify for the no-action 

position and, therefore, commodity pool operators wishing to 

avail themselves of this no-action position need not contact the 

Division. However, if there is any doubt as to whether a 

particular pool qualifies for the no-action position, I or Gary 

Miller, Assistant Chief Accountant, may be contacted at the above 

telephone number. 

SA2:J1, . 

(f.!\)\ <7~~ Paul H. ~arnason, Jr. 

Chief Accountant