CFA Practice Question

CFA Practice Question

Hanson Partners is discussing its past performance results with a potential client. While the firm has been in existence for six years, it only presents the last three years' performance and explains that since the economy is expanding, the last three year's results are the most representative of future performance under existing conditions.
A. Hanson has violated GIPS, by only including three year's data instead of the minimum five years.
B. Hanson has violated GIPS, by only including three year's data instead of the minimum ten years.
C. Hanson has violated GIPS by not adding seven years of simulated performance to provide the client with an accurate picture of what may happen in the future since the past is unlikely to repeat itself.
Explanation: A firm needs to present only five years of performance data, or since inception if it is younger, when it adopts the GIPS. Hanson has been in existence for six years and must present at least five years' performance results.

User Contributed Comments 7

User Comment
danlan Should he present ten years?
Carol1 yes, but the firm only exist for 6 years.
jayjunk Then why 5 years and not 6?
mc01 it is 5 years and an additional year for up to 10 years.
Mikehuynh Minimum of 10 years or since the firm came into being
GBolt93 mc01 is correct. Initially present 5 years or since inception, if the firm is less than 5 years old. Then add 1 year per year until you reach 10 years. I.E. a 20 year old firm could initially present 5 years, then ad each new year going forward until it presented 10 years. when it was 25 years old.
merc5559 this question makes it seem like they aren't presenting data for the 6th year which should be required
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