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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ArchivedEffective: 1 March, 2006 - 31 October, 2012Categories: Cash FlowSource: GIPS Handbook, 2nd Edition
When should we record an incoming cash flow to a portfolio, on the date we are notified the cash is incoming, or the date that we actually receive the funds? In our situation, we are notified of incoming funds in order to allow us to place trades so that the incoming funds are fully invested when the cash contribution is actually received into the portfolio. We use a trade-date accounting methodology for all securities; however we do not reflect cash flows in the portfolio until the cash is physically received (i.e., settlement date). Is this the most accurate methodology to use for reporting performance when there is an external cash flow to the portfolio?
Either the notification date or the date of receipt is acceptable and firms must be aware of the potential impact of this decision on performance calculation systems. The firm should establish a policy to determine which date to use, and apply the policy consistently. The firm should also be aware of any accounting requirements established by regulators for a particular client type. Similarly, for cash distributions from a portfolio, the choice of which date to reflect the external cash flow is left up to the firm, but should be established in the firm’s cash flow policies and procedures, and applied consistently.
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