| SIGNIFICANT ACCOUNTING POLICIES | 2. SIGNIFICANT ACCOUNTING POLICIES In
preparing financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”),
management of the Administrative Sponsor makes estimates and assumptions that affect the reported amounts of assets, liabilities
and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amount of
revenue and expenses reported during the period. Actual results could differ from these estimates. The
following is a summary of significant accounting policies followed by the Trust. 2.1.
Basis of Presentation The
Administrative Sponsor has determined that the Trust falls within the scope of Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 946, Financial Services - Investment Companies, and has concluded that for
reporting purposes, the Trust is classified as an Investment Company. The Trust is not registered as an investment company under
the Investment Company Act of 1940 and is not required to register under such act. 2.2.
Valuation of Gold The
Trust follows the provisions of ASC 820, Fair Value Measurements (“ASC 820”). ASC 820 provides guidance for determining
fair value and requires increased disclosure regarding the inputs to valuation techniques used to measure fair value. ASC 820
defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Gold
is held by the Custodial Sponsor, as custodian on behalf of the Trust, at Gold Corporation's vaulting facilities, generally in
Perth Australia, or such other locations where the Custodial Sponsor may maintain vaulting facilities from time to time. Gold
is initially and subsequently recognized at its fair value, based on the London Bullion Market Association (“LBMA”)
PM Gold Price. The
LBMA PM Gold Price is set at 3:00 p.m. London time via an auction independently operated and administered by ICE Benchmark Administration
(IBA). The price is set in U.S. dollars per fine troy ounces. On
each business day that the NYSE Arca is open for regular trading, as promptly as practicable after 4:00 p.m. New York time, the
Trustee will value the gold held by the Trust and will determine the Net Asset Value of the Trust. The Net Asset Value of the
Trust is the aggregate value of gold and other assets, if any, of the Trust (other than any amounts credited to the Trust's reserve
account, if any) and cash, if any, less liabilities of the Trust, which include estimated accrued but unpaid fees, expenses and
other liabilities. All gold is valued based on its fine ounce content, calculated by multiplying the weight of gold by its purity.
The same methodology is applied independent of the type of gold held by the Trust; similarly, the value of up to 430 fine ounces
of unallocated gold the Trust may hold is calculated by multiplying the number of fine ounces with the price of gold determined
by the Trustee as follows: the Trustee values the gold held by the Trust based on the LBMA PM Gold Price, or the LBMA AM Gold
Price, if such day's LBMA PM Gold Price is not available. If no LBMA PM Gold Price is available for the day, the Trustee will
value the Trust's gold based on the most recently announced LBMA PM Gold Price or LBMA AM Gold Price. If the Custodial Sponsor
determines that such price is inappropriate to use, it shall identify an alternate basis for evaluation to be employed by the
Trustee. The Custodial Sponsor may instruct the Trustee to use a different publicly available price that the Custodial Sponsor
determines to fairly represent the commercial value of the Trust's gold. Neither
the Trustee nor the Sponsors are liable to any Person for the determination that the most recently announced LBMA PM Gold Price
(or other benchmark price) is not appropriate as a basis for evaluation of the gold held or receivable by the Trust or for any
determination as to the alternative basis for evaluation, provided that such determination is made in good faith. Once the value
of gold has been determined, the Trustee will subtract all estimated accrued but unpaid fees, expenses and other liabilities of
the Trust from the total value of gold and any other assets of the Trust (other than any amounts credited to the Trust's reserve
account), including cash, if any. The resulting figure is the Net Asset Value of the Trust. The Trustee will also determine the
Net Asset Value per share by dividing the Net Asset Value of the Trust by the number of shares outstanding as of the close of
trading on the NYSE Arca (which includes the net number of any shares deemed created or redeemed on such evaluation day). ASC
820 establishes a hierarchy that prioritizes inputs to valuation techniques used to measure fair value. The three levels of inputs
are: Level
1: Unadjusted quoted prices in active markets for identical assets or liabilities that the Trust has the ability to access. Level
2: Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly
or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments
and similar data. Level
3: Unobservable inputs for the asset or liability to the extent that relevant observable inputs are not available, representing
the Trust's own assumptions about the assumptions that a market participant would use in valuing the asset or liability, and that
would be based on the best information available. The
Trustee categorizes the Trust's investment in gold as a Level 1 asset within the ASC 820 hierarchy. There were no transfers between
Level 1 and other Levels for the year ended December 31, 2019. 2.3.
Expenses, realized gains and losses The
Trust's only ordinary recurring fee is expected to be the fee paid to the Custodial Sponsor, which will accrue daily at an annualized
rate equal to 0.18% of the daily Net Asset Value of the Trust, paid monthly in arrears (the “Custodial Sponsor Fee”).
The Custodial Sponsor Fee is accrued in and payable in gold. The Custodial Sponsor Fee is subsequently measured at the fair value
of gold accrued with any gain or loss recorded in the Statements of Operations. Realized gains and losses result from the transfer
of gold for share redemptions and are recognized on a trade date basis as the difference between the fair value and cost of gold
transferred. 2.4.
Gold Receivable and Payable Gold
receivable or payable represents the quantity of gold covered by contractually binding orders for the creation or redemption of
Shares respectively, where the gold has not yet been transferred to or from the Trust's account. Generally, ownership of the gold
is transferred within two business days of the trade date. 2.5.
Creations and Redemptions of Shares The
Trust issues and redeems shares in one or more blocks of at least 25,000 shares (a block of 25,000 shares is called a “Basket”)
only to Authorized Participants. The creation and redemption of Baskets will only be made in exchange for the delivery to the
Trust or the distribution by the Trust of the amount of gold represented by the Baskets being created or redeemed, the amount
of which will be based on the combined fine ounces represented by 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. Orders
to create or redeem Baskets may be placed only by Authorized Participants. An Authorized Participant must: (1) be a registered
broker-dealer or other securities market participant, such as a bank or other financial institution, which, but for an exclusion
from registration, would be required to register as a broker-dealer to engage in securities transactions, (2) be a participant
in DTC, and (3) have an agreement with Gold Corporation, as the Trust's custodian, or a LBMA gold clearing bank approved by Gold
Corporation establishing an account or have an existing account meeting certain standards. To become an Authorized Participant,
a person must enter into an Authorized Participant Agreement with the Administrative Sponsor and the Trustee. The Authorized Participant
Agreement provides the procedures for the creation and redemption of Baskets and for the delivery of the gold required for such
creations and redemptions. The Authorized Participant Agreement and the related procedures attached thereto may be amended by
the Trustee and the Administrative Sponsor, without the consent of any investor or Authorized Participant. A transaction fee of
$500 will be assessed on all creation and redemption transactions and paid to the Trustee. Authorized
Participants who make deposits with the Trust in exchange for Baskets will receive no fees, commissions or other form of compensation
or inducement of any kind from either a Sponsor or the Trust, and no such person has any obligation or responsibility to a Sponsor
or the Trust to affect any sale or resale of shares. Changes
in the shares during the year ended December 31, 2019 are:
Balance at December 31,
2018 6,950,000
Creations 4,650,000
Redemptions —
Balance at December 31, 2019 11,600,000 2.6. Organizational Costs The
costs of the Trust's organization are borne directly by the Custodial Sponsor. The Trust is not obligated to reimburse the Custodial
Sponsor for these costs. 2.7.
Income Taxes The
Trust is classified as a “grantor trust” for United States federal income tax purposes. As a result, the Trust itself
is not subject to United States federal income tax. Instead, the Trust's income, gain, losses, and expenses will “flow through”
to the shareholders, and the Trustee reports these to the Internal Revenue Service on that basis. The
Administrative 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 December 31, 2019, the 2018 and 2019 tax years are open for examination. There is no examination in progress at year end. 2.8.
New Accounting Pronouncement In
August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes
to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The update provides guidance that eliminates,
adds and modifies certain disclosure requirements for fair value measurements. ASU 2018-13 will be effective for annual periods
beginning after December 15, 2019. Early adoption is permitted. Management of the Administrative Sponsor does not currently expect
these changes to have a material impact to future financial statements. |
