Original GBL Prospectus - Gabelli

A. SigniÑcant Accounting Policies
Basis of Presentation
GABELLI FUNDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
The consolidated Ñnancial statements include the assets, liabilities and earnings of Gabelli Funds, Inc.
(""GFI''), its wholly-owned subsidiary GAMCO Investors, Inc. (""GAMCO''), and GFI's majority-owned
subsidiaries consisting of Gabelli Securities, Inc. (""GSI''), Gabelli Fixed Income L.L.C. (""Fixed Income'')
and Gabelli Advisers LLC (""Advisers'') (collectively, the ""Company'').
Prior to a reorganization on January 1, 1997, GFI owned approximately 79% of GAMCO. On that date,
all outstanding shares of GAMCO not previously held by GFI were either redeemed at book value by
GAMCO or exchanged for shares of GFI at a predetermined ratio. At December 31, 1995, 1996 and 1997,
GFI owned approximately 76% of GSI and 41% of Advisers, which, combined with the voting interests of
aÇliated parties, represents voting control. At December 31, 1997, GFI owned approximately 80% of Fixed
Income, which commenced operations on April 15, 1997. All signiÑcant intercompany transactions and
balances have been eliminated.
Use of Estimates
The preparation of the consolidated Ñnancial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that aÅect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
consolidated Ñnancial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could diÅer from those estimates.
Nature of Operations
GFI, GAMCO, Fixed Income and Advisers are registered investment advisers under the Investment
Advisers Act of 1940. Gabelli & Company, Inc. (""Gabelli & Company''), a wholly-owned subsidiary of GSI,
is a registered broker-dealer. Gabelli & Company acts as an introducing broker and all transactions for its
customers are cleared through New York Stock Exchange member Ñrms on a fully disclosed basis.
Accordingly, open customer transactions are not reÖected in the accompanying statements of Ñnancial
condition. Gabelli & Company is exposed to credit losses on these open positions in the event of
nonperformance by its customers. This exposure is reduced by the clearing brokers' policy of obtaining and
maintaining adequate collateral until the open transaction is completed.
Cash Equivalents
Cash equivalents consist of investments in money market mutual funds.
Investments in Securities
Investments in securities are accounted for as ""trading securities'' and are stated at quoted market values.
Securities which are not readily marketable are stated at their estimated fair values as determined by the
Company's management. The resulting unrealized gains and losses are included in net gain from investments.
Security transactions and any related gains and losses are recorded on a trade date basis. Realized gains and
losses from securities transactions are recorded on the identiÑed cost basis.
The Company periodically enters into short sales. Securities sold short are stated at quoted market values
and represent obligations of the Company to purchase the securities at prevailing market prices. The ultimate
gains or losses recognized are dependent upon the prices at which these securities are purchased to settle the
obligations under the sales commitments.
F-7