| Significant accounting policies | 2 Significant accounting
policies The preparation of
financial statements in accordance with accounting principles
generally accepted in the United States of America requires those
responsible for preparing financial statements to make estimates
and assumptions that affect the reported amounts and disclosures.
Actual results could differ from those estimates. Certain amounts
in 2014 and 2013 have been reclassified to conform to current
presentation. The following is a summary of significant accounting
policies followed by the Trust. 2.1. Basis of
Accounting The financial statements
have been prepared in conformity with U.S. generally accepted
accounting principles (“U.S. GAAP”), which require
management to make certain estimates and assumptions that affect
the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates. 2.2. Investment Company
Status In June 2013, the FASB
issued Accounting Standards Update 2013-08, Investment Companies
– Amendments to the Scope, Measurement, and Disclosure
Requirements
As a result of the
prospective application of ASU 2013-08, certain disclosures
required by Topic 946 are only presented for periods beginning
October 1, 2014. Financial statements and disclosures for
periods prior to October 1, 2014 will continue to be presented
in their previously reported form, however certain captions have
been changed. The primary changes to the financial statements
resulting from the adoption of ASU 2013-08 and corresponding
application of Topic 946 include:
•
Reporting of investment in gold at fair value on the Statement
of Financial Condition, which was previously reported at the lower
of average cost or market value;
•
Recognition of the net change in unrealized
appreciation/depreciation on investment in gold within the
Statements of Operations, which was previously reported as an
“Adjustment of redeemable shares to redemption value”
on the Statement of Changes in Shareholders’
Deficit;
•
Shares of the Trust are classified as Net Assets on the
Statement of Financial Condition, which was previously classified
as “Shares at redemption value to investors.” An
adjustment was recorded as of October 1, 2014 to reclassify
the balance of Shares at redemption value to investors at
September 30, 2014 into Net Assets as follows (all balances in
000’s):
(Amounts in 000’s of US$) Balance at Transition ASU 2013-08
Shares at redemption value
to investors $ 30,096,869 $ (30,096,869 ) $ —
Net Assets — 30,096,869 30,096,869
•
The addition of a Schedule of Investment and a Financial
Highlights note to the financial statements. ASU 2013-08 prescribes that
an entity that qualifies as an investment company as a result of an
assessment of its status shall account for the effect of the change
in status prospectively from the date of the change in status and
shall recognize any impact as a cumulative effect adjustment to the
net asset value at the beginning of the period. No cumulative
effect adjustment to net asset value was required to be recorded as
a result of the Trusts adoption of ASU 2013-08 because the fair
value of gold bullion held by the Trust was lower than the cost of
gold held by Trust at September 30, 2014, and therefore, there
was no accumulated shareholders’ equity or
(deficit). 2.3.
Fair Value Measurement FASB Accounting Standards
Codification 820, “Fair Value Measurements and
Disclosures” (“ASC 820”), provides a single
definition of fair value, a hierarchy for measuring fair value and
expanded disclosures about fair value adjustments. Various inputs are used in
determining the fair value of the Trust’s assets or
liabilities. These inputs are categorized into three broad levels.
Level 1 includes unadjusted prices in active markets for identical
assets or liabilities. Level 2 includes other significant
observable market based inputs (including prices for similar
securities, interest rates, prepayment speed, and credit risk).
Level 3 includes unobservable inputs, which may include
management’s own assumptions in determining the fair value of
investments. The Trust does not hold any derivative instruments,
and its assets only consist of allocated gold bullion and gold
receivable; representing gold covered by contractually binding
orders for the creation of Shares where the gold has not yet been
transferred to the Trust’s account and, from time to time,
cash, which is used to pay expenses.
The following table
summarizes the Trust’s investments at fair value as of
September 30, 2015:
(Amounts in 000’s of US$) Level 1 Level 2 Level 3
Investment in
Gold $ 24,503,318 $ — $ —
Total $ 24,503,318 $ — $ —
Prior to March 20,
2015, the Trustee valued the gold held by the Trust on the basis of
the price of an ounce of gold set by the afternoon session of the
twice daily fix of the price of an ounce of gold which started at
3:00 PM London, England time and was performed by the four members
of the London Gold Fix. On March 20, 2015, the
LBMA Gold Price replaced the London Gold Fix. ICE Benchmark
Administration Limited (“IBA”) an independent
specialist benchmark administrator provides the auction platform
and methodology as well as the overall independent administration
and governance for the LBMA Gold Price. In determining the net
asset value (“NAV”) of the Trust, the Trustee values
the gold held by the Trust on the basis of the price of an ounce of
gold determined by the IBA 3:00 PM auction process (“LBMA
Gold Price PM”), which is an electronic auction, with the
imbalance calculated, and the price adjusted in rounds (45 seconds
in duration). The auction runs twice daily at 10:30 AM and 3:00 PM
London time. The Trustee determines the NAV of the Trust on each
day the NYSE Arca is open for regular trading, at the earlier of
the LBMA Gold Price PM for the day or 12:00 PM New York time. If no
LBMA Gold Price is made on a particular evaluation day or if the
LBMA Gold Price has not been announced by 12:00 PM New York time on
a particular evaluation day, the next most recent LBMA Gold Price
(AM or PM) is used in the determination of the NAV of the Trust,
unless the Trustee, in consultation with the Sponsor, determines
that such price is inappropriate to use as the basis for such
determination. Prior to July 17, 2015,
once the value of the gold had been determined, the Trustee
subtracted all estimated accrued fees (other than the fees to be
computed by reference to the value of the adjusted net asset value
(“ANAV”) of the Trust or custody fees computed by
reference to the value of gold held in the Trust), expenses and
other liabilities of the Trust from the total value of the gold and
all other assets of the Trust (other than any amounts credited to
the Trust’s reserve account, if established). The resulting
figure is the ANAV of the Trust. The ANAV of the Trust was used to
compute the fees of the Trustee, the Sponsor and the Marketing
Agent prior to July 17, 2015. To determine the
Trust’s NAV, the Trustee subtracted from the ANAV of the
Trust the amount of estimated accrued but unpaid fees computed by
reference to the value of the ANAV of the Trust and computed by
reference to the value of the gold held in the Trust. The Trustee
determined the NAV per Share by dividing the NAV of the Trust by
the number of Shares outstanding as of the close of trading on the
NYSE Arca. Effective July 17,
2015, the Trust’s only recurring expense is the
Sponsor’s fee which accrues daily at an annual rate equal to
0.40% of the daily NAV, in exchange for the Sponsor assuming the
responsibility to pay all ordinary fees and expenses of the
Trust. 2.4.
Custody of Gold Effective December 22,
2014, HSBC Bank plc (the “Custodian”) assumed custodial
responsibilities for the Trust from HSBC Bank USA, N.A. Gold is
held by the Custodian, on behalf of the Trust. 2.5 Gold Receivable Gold receivable represents
the quantity of gold covered by contractually binding orders for
the creation of Shares where the gold has not yet been transferred
to the Trust’s account. Generally, ownership of the gold is
transferred within three business days of the trade
date.
(Amounts in 000’s of US$) Sep-30, Sep-30,
Gold receivable $ 117,353 $ 0 2.6 Gold Payable Gold payable represents the
quantity of gold covered by contractually binding orders for the
redemption of Shares where the gold has not yet been transferred
out of the Trust’s account. Generally, ownership of the gold
is transferred within three business days of the trade
date.
(Amounts in 000’s of US$) Sep-30, Sep-30,
Gold payable $ 0 $ 140,368 2.7 Creations and Redemptions of
Shares The Trust creates and
redeems Shares from time to time, but only in one or more Baskets
(a Basket equals a block of 100,000 Shares). The Trust issues
Shares in Baskets to certain authorized participants
(“Authorized Participants”) on an ongoing basis. The
creation and redemption of Baskets is only made in exchange for the
delivery to the Trust or the distribution by the Trust of the
amount of gold and any cash represented by the Baskets being
created or redeemed, the amount of which will be based on the
combined net asset value of the number of Shares included in the
Baskets being created or redeemed determined on the day the order
to create or redeem Baskets is properly received. As the Shares of the Trust
are redeemable in Baskets at the option of the Authorized
Participants, the Trust has classified the Shares as Redeemable
Shares on the Statement of Financial Condition as of
September 30, 2014 and 2013, respectively, and as Net Assets
as of September 30, 2015. Prior to adoption of ASU 2013-08,
the Trust recorded the redemption value of the Shares, which
represented its maximum obligation, as Redeemable Shares with the
difference from cost as an offsetting amount to Shareholders’
Equity. Changes in the Shares for the years ended
September 30, 2015, 2014 and 2013 are as follows:
(All amounts are in 000’s) Year Ended Year Ended Year Ended
Activity in Number of
Shares Issued and Outstanding:
Creations 55,100 47,200 51,100
Redemptions (81,700 ) (91,500 ) (187,400 )
Net increase/(decrease)
Shares Issued and Outstanding (26,600 ) (44,300 ) (136,300 )
(Amounts in 000’s of US$) Year Ended Year Ended Year Ended
Activity in Value of Shares
Issued and Outstanding:
Creations $ 6,447,849 $ 5,893,107 $ 7,734,465
Redemptions (9,247,346 ) (11,209,535 ) (26,693,165 )
Net increase/(decrease)
Shares Issued and Outstanding $ (2,799,497 ) $ (5,316,428 ) $ (18,958,700 )
2.8 Revenue Recognition
Policy The Trustee will, at the
direction of the Sponsor or in its own discretion, sell the
Trust’s gold as necessary to pay the Trust’s expenses.
When selling gold to pay expenses, the Trustee will endeavor to
sell the smallest amount of gold needed to pay expenses in order to
minimize the Trust’s holdings of assets other than gold.
Unless otherwise directed by the Sponsor, when selling gold, the
Trustee will endeavor to sell at the price established by the LBMA
Gold Price PM. The Trustee will place orders with dealers (which
may include the Custodian) through which the Trustee expects to
receive the most favorable price and execution of orders. The
Custodian may be the purchaser of such gold only if the sale
transaction is made at the next LBMA Gold Price (either AM or PM)
following the sale order. A gain or loss is recognized based on the
difference between the selling price and the average cost of the
gold sold, and such amounts are reported as net realized
gain/(loss) from investment in gold sold to pay expenses on the
Statement of Operations. The Trust’s net
realized and change in unrealized gain/(loss) on investment in gold
for the year ended September 30, 2015 of ($2,575,188) is made
up of a loss of ($5,170) on the sale of gold to pay expenses, plus
a loss of ($447,044) on gold distributed for the redemption of
Shares, plus an unrealized (loss) of ($2,122,974) on investment in
gold. The Trust’s total
gain/(loss) on gold for the year ended September 30, 2014 of
($96,630) is made up of a gain of $6,302 on the sale of gold to pay
expenses, plus a gain of $374,322 on gold distributed for the
redemption of Shares, minus an unrealized (loss) of ($477,254) on
investment in gold. The Trust’s total
gain/(loss) on gold for the year ended September 30, 2013 of
$4,735,252 is made up of a gain of $52,407 on the sale of gold to
pay expenses plus a gain of $4,682,845 on gold distributed for the
redemption of Shares. 2.9 Income Taxes The Trust is classified as
a “grantor trust” for U.S. federal income tax purposes.
As a result, the Trust itself will not be subject to U.S. federal
income tax. Instead, the Trust’s income and expenses will
“flow through” to the Shareholders, and the Trustee
will report the Trust’s proceeds, income, deductions, gains,
and losses to the Internal Revenue Service on that basis. The
Sponsor of the Trust has evaluated whether or not there are
uncertain tax positions that require financial statement
recognition and has determined that no reserves for uncertain tax
positions are required as of September 30, 2015 or
2014. The Sponsor evaluates tax
positions taken or expected to be taken in the course of preparing
the Trust’s tax returns to determine whether the tax
positions are “more-likely-than-not” to be sustained by
the applicable tax authority. Tax positions not deemed to meet that
threshold would be recorded as an expense in the current year. The
Trust is required to analyze all open tax years. Open tax years are
those years that are open for examination by the relevant income
taxing authority. As of September 30, 2015 the 2014, 2013, and
2012 tax years remain open for examination. There are no
examinations in progress at period end. |
