The Ontario Securities Commission says that accounting rules should not prevent mutual funds from disclosing their management expense ratios (MERs) in financial statements.

The issue arises because existing securities rules require the MER to be presented in the notes to interim and annual financial statements of mutual funds, whereas proposed new rules require the MER to be reported in a new document (known as the Management Report of Fund Performance).

As well, there is some question as to whether the MERs should not be included in financials under accounting rules.

In a letter addressed to IFIC dated Dec. 2, 2004, Irene Tsatsos, senior accountant in the OSC’s Investment Funds branch, writes “I understand some have also questioned whether the MER could be considered a per share measure that is inappropriate for inclusion in financial statements prepared in accordance with generally accepted accounting principles as defined in the CICA Handbook.”

“After consultation with the Office of the Chief Accountant, we are satisfied that presentation of the MER in notes to financial statements does not contradict either the letter or the spirit of the Accounting Recommendations in the CICA Handbook,” she notes. “We would note that the MER is merely a ratio, the calculation of which is prescribed by rule, and does not in any sense purport to represent an individual unitholder’s claim on an income statement amount.”