| 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 (“U.S. GAAP”) 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. The following is a summary of
significant accounting policies followed by the Trust.
2.1. Basis of Accounting
The Trust is an investment company and, therefore, applies the
specialized accounting and reporting guidance in Accounting
Standards Codification Topic 946, Financial
Services—Investment Companies.
2.2. Fair Value Measurement
FASB Accounting Standards Codification Topic 820, Fair Value
Measurements and Disclosures, provides a single definition of fair
value, a hierarchy for measuring fair value and expanded
disclosures about fair value adjustments.
The Trust does not hold any derivative instruments, and its assets
only consist of allocated gold bullion and, from time to time, (i)
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 (ii) cash, which is
used to pay expenses.
U.S. GAAP defines fair value as the price the Trust would receive
to sell an asset or pay to transfer a liability in an orderly
transaction between market participants at the measurement date.
The Trust’s policy is to value its investments at fair
value.
Various inputs are used in determining the fair value of assets and
liabilities. Inputs may be based on independent market data
(“observable inputs”) or they may be internally
developed (“unobservable inputs”). These inputs are
categorized into a disclosure hierarchy consisting of three broad
levels for financial reporting purposes. The level of a value
determined for an asset or liability within the fair value
hierarchy is based on the lowest level of any input that is
significant to the fair value measurement in its entirety. The
three levels of the fair value hierarchy are as follows:
Level 1 – Unadjusted quoted prices in active markets for
identical assets or liabilities;
Level 2 – Inputs other than quoted prices included
within Level 1 that are observable for the asset or liability
either directly or indirectly, including quoted prices for similar
assets or liabilities in active markets, quoted prices for
identical or similar assets or liabilities in markets that are not
considered to be active, inputs other than quoted prices that are
observable for the asset or liability and inputs that are derived
principally from or corroborated by observable market data by
correlation or other means; and
Level 3 – Inputs that are unobservable for the asset or
liability, including the Trust’s assumptions used in
determining the fair value of investments.
The following table summarizes the Trust’s investments at
fair value:
(Amounts in 000’s of US$)
March 31, 2018 Level 1 Level 2 Level 3
Investment in Gold $ 36,013,428 $
— $
—
Total $ 36,013,428 $
— $
—
(Amounts in 000’s of US$)
September 30, 2017 Level 1 Level 2 Level 3
Investment in Gold $ 35,669,225 $
— $
—
Total $ 35,669,225 $
— $
—
There were no transfers between Level 1 and other Levels for
the six months ended March 31, 2018 or for the year ended
September 30, 2017.
The Trustee values the gold held by the Trust on the basis of the
price of an ounce of gold as determined by the ICE Benchmark
Administration Limited (“IBA”), a benchmark
administrator, which provides an independently administered auction
process as well as the overall administration and governance for
the London Bullion Market Association (“LBMA”). 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 a price is inappropriate to use as the basis
for such determination.
2.3. Custody of Gold
Gold is held by HSBC Bank plc (the “Custodian”), on
behalf of the Trust. During the year ended September 30, 2017
and the six month period ended March 31, 2018, no gold was
held by a subcustodian.
2.4. 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 two business
days of the trade date.
(Amounts in 000’s of
US$) Mar-31, Sep-30,
Gold receivable $
— $
—
2.5. 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 two business
days of the trade date
(Amounts in 000’s of
US$) Mar-31, Sep-30,
Gold payable $
— $
—
2.6. 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 Net Assets as of March 31, 2018. Activity in the number of
Shares issued and outstanding for the six months ended
March 31, 2018 and for the year ended September 30, 2017,
are as follows:
(Amounts are in
000’s)
Six Months Ended Mar-31, 2018
Year Ended Sep-30, 2017
Activity in Number of Shares Issued and Outstanding:
Creations 32,200 92,500
Redemptions (37,900 ) (119,400 )
Net increase/(decrease) in Number of Shares Issued and
Outstanding (5,700 ) (26,900 )
(Amounts in 000’s of
US$)
Six Months Ended Mar-31, 2018 Year Ended Sep-30, 2017
Activity in Value of Shares Issued and Outstanding:
Creations $ 4,003,820 $ 11,161,181
Redemptions (4,686,586 ) (13,903,151 )
Net increase/(decrease) in Value of Shares Issued and
Outstanding $ (682,766 ) $ (2,741,970 )
2.7. 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,
the Trustee will sell gold to the Custodian at the next LBMA Gold
Price 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 six month period ended March 31,
2018 of $1,096,754 is made up of a realized gain of $2,508 from the
sale of gold to pay expenses, a realized gain of $187,077 from gold
distributed for the redemption of Shares, and a change in
unrealized appreciation of $907,169 on investment in gold.
The Trust’s net realized and change in unrealized gain/(loss)
on investment in gold for the six month period ended March 31,
2017 of ($2,640,593) is made up of a realized loss of ($830) from
the sale of gold to pay expenses, a realized loss of ($277,748)
from gold distributed for the redemption of shares, and a change in
unrealized depreciation of ($2,362,015) on investment in gold.
2.8. Income Taxes
The Trust identifies its major tax jurisdiction as the United
States. 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
March 31, 2018 or September 30, 2017.
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” |
