Exchange Stabilization Fund's Accounting Presentation in Its Financial Statements

The Exchange Stabilization Fund's accounting presentation of certain items in its financial statements was reexamined from the points of view of: (1) the treatment of special drawing rights allocations as liabilities; and (2) accounting for the accrued Fund exchange gains and losses. The three alternatives for classifying the special drawing rights allocations are: as a long-term liability since it represents an obligation that arises under certain circumstances, as equity since the objective is to make special drawing rights the principal reserve asset in the international monetary system, or as a special category on the balance sheet after the liability section and before the equity section. In selecting an appropriate alternative, management will need to decide which of the alternatives best reflect the substance of the special drawing rights and the effect on the resources of the Fund. In the present accounting treatment for accrued exchange gains and losses, the Fund absorbs all translation gains and losses arising from obligations denominated in foreign currencies. As long as the Treasury Department presents the Fund's annual report in accordance with generally accepted accounting principles, it should abide by Financial Accounting Standards Board Statement No. 8 relating to translation of foreign currency transactions.