CFA Practice Question

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CFA Practice Question

In cases where applicable local laws conflict with the GIPS standards, ______

A. the GIPS standards take precedence.
B. local laws take precedence.
C. the firm should comply with the stricter of the two.
Correct Answer: B

However, the firm should make full disclosure of the conflict.

User Contributed Comments 19

User Comment
surob If local law conflicts with GIPS, how come you can comply with both? Any thoughts? I am a bit confused. Thanks for your comments in advance
pierreE14 hi surob
GIPS is a voluntary guideline for presentation of fair reality. Not a legal requirement.
If conflict => follow the law.
I guess conflict would be disclosed
quynhnk79 Is it right with the No.2 statement above?
(serve as the minimum standard...)
1. Refer to CFA reading 4, Objectives, not include this point
2. Reading 4, Background: stating that GIPS are no longer a minimum worldwide standard, instead, promotes highest performance measurement and presentation practices...

Someone can explain?
Khadria Under section

(h) The appropriate disclosure when the GIPS standards and local regulations are in conflict.

it is stated:
"In cases of conflicts with GIPS, the standards require that local laws and regulations take precedence over GIPS."

but in this section it says:
"When applicable local or country-specific law or regulation conflicts with the GIPS standards, firms should comply with the GIPS standards in addition to those local requirements."

netty I agree with Khadria, When there is a conflict, the standards require that local laws n regulations take precedence over GIPS hence how can firms comply with both?
bobert I believe it is the stricter rule dominates, and also implement the rest of GIPS guidelines.
sanyukta yes, i agree with bobert, the stricter rule applies..
jainrajeshv As mentioned by pierreE14 We should follow local laws and disclose the conflicts separately.
Shalva You must adhere to the local law, but fully disclose what was the nature of conflict with GIPS. In this case, I believe, you also stay compliant to GIPS
mencob This is a hard one as one can refer to the rule of thumb and apply the strictest between the two.
However, local law always takes precedence, otherwise you go to jail...
CFAVick I agree with Shalva. The stricter rule principle applies to the 7 standards not to GIPS.
ChrisHam According to the book, if there is a conflict with the local law, then there should be a full disclosure while abiding by the local law.
riouxcf You can publish a GIPs compliant presenation AND a local law compliant presenatation. Two presentations. Then on the local law presentation you make it as GIPs compliant as possible and disclose what it is about it that is not GIPs compliant and the reasons why (i.e. local law)
Gooner7 the key word is "conflict"
NikolaZ only if the stricter GIPS embodies the local laws and applies additional regulations, then C could be correct, but this is a conflict so local laws must take precedence
geofin From the note:
"GIPS standards serve as minimum worldwide standards: if local laws are stricter than GIPS, local laws should be applied. If local laws don't exist or are less strict than GIPS, the GIPS should apply. In cases of conflicts with GIPS, the standards require that local laws and regulations take precedence over GIPS. Firms should disclose the conflicts."
johntan1979 LOCAL LAW takes precedence, NOT the stricter of the two.
dirdeb I interpret it like this: If the local law and GIPS conflict, the local law must take precedent (as you can't voluntary enter into anything illegal) That said, when possible you must comply with GIPS in ADDITION to the law.
00ahmed I understand the meaning of composite in general but what does it mean here in GIPS context?
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