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B-154506 1 (1978-08-23)

handle is hein.gao/gaobabmlu0001 and id is 1 raw text is: COMPROM,,,L GENERA. OF THE UNITEo WAtGV4 , ~ - x054' B-154506 . The Honorable Anthony M. Solomon Under Secretary for Monetary Affairs Department of the Treasury Dear Tony: Your letter of May 16, 197fV, asked us to work with the Treasury Department in reexamining the Exchange Stabilization Fund's accounting presentation of certain items in its financial. statements, specifically the (1) treatment of special d:awing rights allocations as liabilities and (2) accounting for the accrued Exchange Stabilization Fund exchange gains and losses. In regard to your first question, there 6re three alterna- tivea. for classifying the special drawing rights allocati.ons. I 1. As a long-term liability, since it represents an obligation that arises if the International Monetary Fund or the Special Drawing Account were liquidated, if the United States withdrew from the Fund or the Special Drawing Rights Department, or if the special drawing rights allocation were cancelled. This method is cur- rently used in the Exchange Stabilization Fund's annual report. If management determines that the-above events are probable (the event or events are likely to occur) then this would be the preferred alternative. The'International Monetary Fund suggested that the allocation may be accounted for as a liability; however, it prescribed no particular accounting treatment by country participants, advising that participants would be guided by their own legislation, policies and practices. 2. As equity, Since the objective is to make special drawing rights the principal reserve asset in the international monetary system, and they would then be a permanent addition to the stock of world reserves, subject only to the decision of member governments in the International Monetary Fund to cancel them. If management determines that the prospect for any cancellation is remote (the chance of the event occurring is slight), then this would be the preferred alternative.

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