Q & A Database

The GIPS Standards Q&A database contains questions and answers (Q&As) on various searchable topics that provide additional interpretation on an issue. Q&As are considered to be authoritative guidance and must be followed in order to claim compliance with the GIPS standards.

Content from prior Q&As was included in the GIPS Standards Handbook as much as possible and many Q&As were archived. Change the Status drop-down filter to "Archived" to see the archived Q&As.

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Archived

Effective: 1 October, 2012 - 31 December, 2019

Categories: Alternative Investments

Source: Guidance Statement on Alternative Investment Strategies and Structures

The GIPS standards require that the trade date principle must be used when accounting for investment transactions. The GIPS standards define trade-date accounting as recognizing the asset or liability on the date of the purchase or sale, and not on the settlement date; recognizing the asset or liability within three days of the date the transaction is entered into satisfies the trade date accounting requirement for purposes of the GIPS standards. When subscribing to or redeeming from hedge funds, transactions often cannot be recognized on the trade date because the fund administrator’s confirmation with the final settlement quantity and price may be provided only several days or even weeks after the subscription/redemption trading order has been submitted. In such a situation, it may not be possible for the hedge fund of funds manager to account for the subscription/redemption on the trade date (or within three days of the trade date) because the final quantity and settlement price of the transacted fund is not known until the administrator’s confirmation has been received. How can such a situation be handled in terms of GIPS compliance?

The T + 3 principle for trade-date accounting defined in the GIPS standards is valid for all investment transactions. For alternative investments, firms may need to differentiate between the date of placing a subscription/redemption order and the date of the effective asset ownership transfer. The date of the execution or transfer of ownership (in this case, when the definitive quantity and settlement price of the asset being purchased/sold is determined and becomes known) should be considered the trade date.