payment-in-kind bonds

Assets1

1. 320-946Financial Services—Investment Companies320 Investments—Debt Securities

   This Subtopic governs how an investment company (a fund) accounts for its portfolio of debt and equity securities, with special attention to high-yield debt securities such as zero-coupon, step, and payment-in-kind (PIK) bonds. Core rules: record purchases and sales on trade date, initially measure at transaction price including commissions, subsequently measure at fair value, recognize interest on step and PIK bonds using the interest method (with reserves when income is not expected to be realized), and record dividends on the ex-dividend date. It also prescribes the treatment of capital infusions, workout expenditures, and writeoffs of purchased versus accrued interest.