8.6 Key Accounting and Reporting Requirements

NISM-Series-V-A: Mutual Fund Distributors Certification Examination Exam

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1 Chapter 1: Introduction & Exam Overview

1.1 About the NISM-Series-V-A Examination 1.2 The 12-Unit Curriculum Map and a Study Plan

2 Chapter 2: Investment Landscape

2.1 Investors and Their Financial Goals 2.2 Savings or Investments? 2.3 Different Asset Classes 2.4 Investment Risks 2.5 Risk Measures and Management Strategies 2.6 Behavioural Biases in Investment Decision Making 2.7 Risk Profiling 2.8 Asset Allocation and Do-It-Yourself versus Professional Help

3 Chapter 3: Concept and Role of a Mutual Fund

3.1 Concept of a Mutual Fund 3.2 Classification of Mutual Funds 3.3 Growth of the Mutual Fund Industry in India

4 Chapter 4: Legal Structure of Mutual Funds in India

4.1 Structure of Mutual Funds in India 4.2 Key Constituents of a Mutual Fund 4.3 AMC Organisation Structure and Service Providers 4.4 Role and Function of AMFI

5 Chapter 5: Legal and Regulatory Framework

5.1 Role of Regulators in India 5.2 Role of SEBI and the Mutual Fund Regulations 5.3 Due Diligence Process by AMCs for Distributors 5.4 Investor Grievance Redress Mechanism 5.5 AMFI Code of Conduct for Intermediaries

6 Chapter 6: Scheme Related Information

6.1 Mandatory Documents I: Scheme Information Document and Statement of Additional Information 6.2 Mandatory Documents II: Key Information Memorandum and the Advertisement Code 6.3 Non-Mandatory Disclosures

7 Chapter 7: Fund Distribution and Channel Management Practices

7.1 The Role and Importance of Mutual Fund Distributors 7.2 Different Kinds of Mutual Fund Distributors 7.3 Modes of Distribution 7.4 Pre-requisites to Become a Distributor of a Mutual Fund 7.5 Revenue for a Mutual Fund Distributor 7.6 Commission Disclosure Mandated by SEBI 7.7 Distributors versus Investment Advisers, Nomination Facilities and Change of Distributor

8 Chapter 8: Net Asset Value, Total Expense Ratio and Pricing of Units

8.1 Fair Valuation Principles 8.2 Computation of Net Assets of a Scheme and NAV 8.3 Dividends and Distributable Reserves 8.4 Entry and Exit Load and Its Impact on NAV 8.5 The Expense Ratio Framework: Base Expense Ratio, Brokerage and Statutory Levies 8.6 Key Accounting and Reporting Requirements 8.7 NAV, Total Expense Ratio and Pricing of Units for the Segregated Portfolio

9 Chapter 9: Taxation

9.1 Applicability of Taxes in Respect of Mutual Funds 9.2 Capital Gains on Mutual Fund Units 9.3 Dividend (IDCW) Income and Tax Deducted at Source 9.4 Stamp Duty and Securities Transaction Tax on Mutual Fund Units 9.5 Setting Off Capital Gains and Losses under the Income Tax Act 9.6 Tax Benefit under Section 80C and Applicability of GST

10 Chapter 10: Investor Services

10.1 The New Fund Offer Process 10.2 New Fund Offer Price and Ongoing Offer Price for Subscription 10.3 Investment Plans and Services 10.4 Allotment of Units and Account Statements 10.5 Mutual Fund Investors: Who Can Invest 10.6 Filling the Application Form for Mutual Funds 10.7 Financial Transactions with Mutual Funds 10.8 Cut-Off Time and Time Stamping 10.9 KYC Requirements for Mutual Fund Investors 10.10 Systematic Transactions and Their Operational Aspects 10.11 Non-Financial Transactions, Special Investor Categories and Turnaround Times

11 Chapter 11: Risk, Return and Performance of Funds

11.1 General and Specific Risk Factors 11.2 Factors That Affect Mutual Fund Performance 11.3 Drivers of Returns and Risk in a Scheme 11.4 Measures of Returns 11.5 SEBI Norms Regarding Representation of Returns 11.6 Risks in Fund Investing: The Investor's Perspective 11.7 Measures of Risk and Provisions Relating to Credit Risk

12 Chapter 12: Mutual Fund Scheme Performance

12.1 Benchmarks and Performance 12.2 Price Return Index or Total Return Index 12.3 Basis of Choosing an Appropriate Performance Benchmark 12.4 Benchmarks for Equity Schemes 12.5 Benchmarks for Debt Schemes and Other Schemes 12.6 Quantitative Measures of Fund Manager Performance 12.7 Tracking Error and Scheme Performance Disclosure

13 Chapter 13: Mutual Fund Scheme Selection

13.1 Scheme Selection Based on Investor Needs, Preference and Risk Profile 13.2 Risk Levels in Mutual Fund Schemes 13.3 Scheme Selection Based on Investment Strategy 13.4 Selecting a Scheme Across AMCs or Within a Scheme Category 13.5 Selecting Options in Mutual Fund Schemes and Do's and Don'ts

8.6 Key Accounting and Reporting Requirements

Key Takeaways Explain This Topic AI

Each scheme maintains its own books of account, separate from the AMC and from other schemes.

NAV must be computed and published every business day, and portfolios disclosed monthly.

Half-yearly unaudited results and an audited annual report are required for every scheme.

The scheme auditor is appointed by the trustees and must differ from the AMC's auditor.

Investors receive account statements and a consolidated account statement across all funds linked to their PAN.

Last updated: August 2026

Separate Books for Every Scheme

The foundational accounting rule is segregation . Each scheme maintains its own books of account , distinct from the AMC's books and from those of every other scheme of the same fund house.

The consequences follow directly from the trust structure:

Income earned by a scheme belongs to that scheme's unitholders
Expenses of a scheme are charged to that scheme and to no other
One scheme's losses can never be met from another scheme's assets
The AMC's own profit or loss is entirely separate from scheme accounts

A fund house cannot subsidise a poorly performing scheme from a successful one, and cannot move expenses between schemes.

Accrual Accounting

Scheme accounts are maintained on an accrual basis :

Income — interest and dividends are recognised as they accrue or are declared, not when received
Expenses — recurring expenses accrue daily
Unrealised appreciation or depreciation — recognised through valuation, but not distributable
Realised gains — recognised on sale and available for distribution

The distinction between realised and unrealised is central, and links directly to the distribution rules in section 8.3.

Daily Requirements

Requirement Rule
NAV computation Every business day
NAV publication AMC website and AMFI website by the prescribed deadline
Decimal places Four for liquid and debt schemes; at least two for equity and hybrid
Expense accrual Daily
Periodic Disclosure
Monthly
Complete portfolio of every scheme, disclosed on the AMC website in the prescribed format
Risk-o-meter , evaluated and disclosed, with changes communicated to unitholders
Half-yearly
Unaudited financial results for each scheme, published in the prescribed format

Consolidated Account Statement to investors, carrying the commission and expense-ratio disclosures discussed in section 7.6

Annually

Audited annual report for each scheme, including the balance sheet, revenue account, notes, and the auditor's report

Abridged summary provided to unitholders, with the full report available on request and on the website
Voting disclosure covering how the AMC voted on investee company resolutions, with rationale
Disclosure of the number of risk-o-meter changes during the year
The Audit

Two audits, appointed by different parties:

Audit Appointed by Covers
Scheme audit Trustees The accounts of each scheme
AMC audit The AMC in general meeting The AMC's own accounts as a company

The scheme auditor must be different from the AMC's auditor. Trustee appointment is the mechanism that makes the scheme audit genuinely independent of the entity whose management it examines.

Statements to Investors

Statement When Content
Allotment confirmation On allotment Units allotted, NAV applied, amount invested
Account statement On transaction Folio-level transaction detail

Consolidated Account Statement, monthly To investors who transacted that month All transactions across mutual funds linked to the PAN

Consolidated Account Statement, half-yearly Half-yearly All folios, plus commission paid and expense ratios of both plans

A CAS consolidates across all mutual funds against the investor's PAN , rather than being limited to one fund house. Where units are held in dematerialised form the CAS is issued by the depository and covers other securities as well. Investors who have not provided a PAN receive folio-level statements from each AMC instead.

Why This Matters to a Distributor

The reporting architecture is the source of the answers to most investor questions. Where did the money go? The monthly portfolio. What did it cost? The expense ratio in the CAS. How much did you earn from me? The half-yearly CAS in rupees. Did the fund house vote on that governance controversy? The annual voting disclosure.

A distributor who can point to the document that answers a question — rather than offering an opinion — is providing exactly the service the framework was designed to enable.

Unit Capital, Reserves and the Balance Sheet

A scheme's balance sheet has a structure worth recognising, because questions occasionally test the components.

Item What it represents
Unit capital Face value of units outstanding
Unit premium reserve Amount received above face value on issue of units
Reserves and surplus Retained realised gains and accumulated income
Unrealised appreciation reserve Mark-to-market gains not yet realised
Current liabilities and provisions Amounts payable, accrued expenses

Two points follow directly from the distribution rules in section 8.3. The unit premium reserve is subscription money, not income , and cannot be distributed. Unrealised appreciation is not distributable either, because the gain has not been crystallised. Only realised gains and distributable surplus may be paid out.

Recognition of Income and Expenses

Dividend income is recognised on the ex-dividend date rather than on receipt.

Interest accrues on a daily, time-proportionate basis.

Purchases and sales of securities are recognised on trade date rather than settlement date.

Expenses accrue daily, so a scheme's NAV always reflects costs to date.

Brokerage and transaction costs on purchases form part of the cost of acquisition; those on sales reduce the sale proceeds.

What the Annual Report Contains

Beyond the financial statements, the scheme annual report carries material a diligent reader will find nowhere else:

Portfolio turnover for the year
Total expense ratio actually charged, against the applicable cap
Commission paid to distributors , in aggregate
Details of transactions with associates of the sponsor and AMC
Investor complaints received, resolved and pending, by category
Unclaimed redemption and distribution amounts
Statement of large unitholdings , where any investor holds above the prescribed proportion

The complaints table repays attention. A scheme showing a rising count of complaints of the same type is describing a process problem, and that is information no performance figure conveys.