Statements such as the following makes me head spin:
Cash must be allocated to the carve-out returns of the growth equities of the firm’s balanced composites, and the method used to allocate cash to the carveouts must be disclosed.
DISCLAIMER…i’m not an expert…just trying to explain this stuff the way i understood it…if i’m wrong pls correct me…and sorry for the colloquial lazy language 
okay…a carve-out is basically a portion of a portfolio that is used to demostrate the performance of an asset class…so if u have a balanced portfolio (stock+bonds), and you want to present to your clients how awesome you are at managing equities as an asset class, then you can “carve-out” the equity portion from that portfolio (returns, and other nice numbers) and present it accordingly…
Now this method could be misleading…say if you are demonstrating your expertise in Asian securities after having carved-out Asian stocks from your Asia+Americas portfolio, but in reality your Asian securities only amounted to 2 stocks…you cant really claim expertise in Asian stocks diversification bcos just 2 stocks is nothing to write home about…
Also, theres this thing about cash allocations. If you are the manger of a balanced portfolio (again,stock+bonds), and you sold some bonds, then you now got some cash from the sale…lets say you used this cash to buy some stocks…those stocks gave some dividends, then you used those cash dividends to buy some more bonds…etc…the point is, even though you have cash coming in and out of the portfolio, you cant really pinpoint the exact source of that cash to either equity or to bonds anymore bcos you only have a single balanced portfolio and you considered the cash you had as just cash, and not equity-cash or bonds-cash. So if there’s just a single manager managing a balanced portfolio, he CANNOT carve-out say equities separately and show it off…cos equities being just stocks alone wont be representative of the manager’s returns and abilities bcos it doesnt include the cash the equities may have generated (selling stocks, cash from dividends etc)…and because of the way the cash had been used (bcos it was just a single portfolio of cash+bonds) we cant take the cash separately and allocate it to a carve-out as we arent sure whetther the cash came from equities or from bonds…
So, prior to 2010, the rule was that cash should be allocated in such situations, on a “predefined, timely and consistent basis…and this method must be disclosed” (which is what you have pasted above)…which means say if theres 40 equities, 40 bonds and 20 cash, then you say pre-define to split cash evenly…that is, 10 cash from equities, and 10 cash from bonds…irrespective of what the true picture is…now this is obviously ridiculous,because if in reality, cash from equities was 19 and bonds 1, and if the market was trending upwards, then the cash of 19 from equities represents poor management skills…cos i’d rather be invested in the equities market than be holding cash from equities…
to alleviate this problem, beginning jan 2010 however, the rules were changed…now, you cant carve out from one single balanced portfolio…instead, its only possible to carve out if you have say 2 separate managers each managing his/her own portfolio of only stocks/only bonds, so that the source of cash allocations from each become absolutely clear…
a lot of words i know, but hope this helps 
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Nothing to add, that answer was perfect
GIPS suck. Period.
real value here.
Few reservations. It perhaps is not the source of cash. Basic idea is Manager shouldn’t be able to cherry pick and mislead investors. So if a sec. has to be shown as part of equity as well the balance fund… He could do so provided he creates a separate sub account under the composite of equity and mentions the amount dedicated to the stock. I may stand corrected.
Mark it
Great answer. thanks!