"The requirement to revalue for large flows has been dropped"...NOT!

I was at a client yesterday conducting a verification, and a colleague, who is quite well versed on the Global Investment Performance Standards (GIPS(R)), pointed out that the planned (1 January 2010) requirement to revalue portfolios for large external cash flows had been dropped from the final version of GIPS 2010. Well, I was a tad confused, because I would have thought that I would have heard of such a major change. And so, I went looking.

I believe my colleague focused on section 2, which deals with calculations. In the 2005 edition we find the following:

• 2.A.2.b. For periods beginning 1 January 2010, firms must value portfolios on the date of all large external cash flows.

This no longer appears. In the 2010 edition we find:

• 2.A.2.b. For periods beginning on or after 1 January 2005, firms must calculate portfolio returns that adjust for daily weighted external cash flows.

which is 2.A.2.a. in the 2005 version.

And so, HAS the requirement to revalue for large flows been dropped? Well, no, it hasn't. The wording just shifted a bit. On the same page in the 2010 version we find:

• 1.A.3 Firms must value portfolios in accordance with the composite-specific valuation policy. Portfolios must be valued:
• b. For periods beginning on or after 1 January 2010, on the date of all large cash flows. Firms must define large cash flow for each composite to determine when portfolios in that composite must be valued.

I will admit that I prefer the wording as it is the 2005 edition, but the GIPS Executive Committee decided to shift it to the "Input Data" section.

But NO, the requirement was NOT dropped!