GIPS CFAI answer make no sense based on the material

Please read this policies and tell me why the CFAI answer below is correct…

[question removed by moderator]

transaction completion - is settlement date … and that is not permitted per GIPS … hence that answer Policy 2 - is incorrect.

3rd party service can be used for valuations of assets …

accrual accounting should be used. …

so other 2 are not incorrect, only A is incorrect …


I thought portfolio is supposed to be valued at fair value. Is fair value equates to market value? If so, i was confused between fair value and Market value.

read the question again… they are asking for the INCORRECT statement.

And again - read my response to your original question.

there’s a hierarchy of valuation:

  1. market value

  2. quoted prices of similar assets if 1 is unavailable

  3. market-based inputs (usually multiples such as P/E or P/S) if 1 and 2 are unavailable

  4. subjective, unobservable inputs (usually DCF) if 1,2 and 3 are unavailable

I’d like to think that fair-value is what GIPS consider a valuation that follows this hierarchy. so if market value is known, that’s automatically fair value.

Above post did not post “c” point.

Hierarchy should be as follows:

a. Investments must be valued using objective, observable, unadjusted quoted market prices for identical investments in active markets on the measurement date, if available. b. Objective, observable quoted market prices for similar investments in active markets. If not available or appropriate, then investments should be valued using; c. Quoted prices for identical or similar investments in markets that are not active (markets in which there are few transactions for the investment, the prices are not current, or price quotations vary substantially over time and/or between market makers). If not available or appropriate, then investments should be valued based on; d. Market-based inputs, other than quoted prices, that are observable for the investment. If not available or appropriate, then investments should be valued based on; e. Subjective unobservable inputs for the investment where markets are not active at the measurement date. Unobservable inputs should only be used to measure fair value to the extent that observable inputs and prices are not available or appropriate. Unobservable inputs reflect the firm’s own assumptions about the assumptions that market participants would use in pricing the investment and should be developed based on the best information available under the circumstances.