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 February, 1997 - 31 December, 2019Categories: Fixed IncomeSource: Standards Reporter, Jan - Feb 1997
How should a firm claiming compliance with the GIPS standards treat bonds in default when calculating their performance results?
If a bond goes into default, a firm must recognize the loss when it occurred. The historical performance figures must not be recalculated. The accrual of interest must be included in the calculation method up until the point of the bond’s default. At that point, the calculation method would reflect the loss of accrued interest by adjusting the amount of accrued interest to zero.
When and if the bond comes out of default and there is a reasonable expectation that the bond will commence paying interest, including back interest, the firm must begin accruing for such interest payments. The firm may not allocate such payments over periods when they were originally due, but not paid.