XML 33 R11.htm IDEA: XBRL DOCUMENT
v2.4.1.9

Significant Accounting Policies | 12 Months Ended
--- | ---
Dec. 31, 2014
Significant Accounting Policies [Abstract] |
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. The following is a summary of significant accounting policies followed by the Trust. 2.1. Basis of Accounting Since the Trust’s inception, the Sponsor determined that the Trust was not an investment company within the scope of Financial Accounting Standards Board (“FASB”) Codification of Accounting Standards, Topic 946, Financial Services—Investment Companies (“Topic 946”). Consequently, the Trust did not prepare its financial statements applying standards applicable to investment companies in accordance with Topic 946, including recording its investment in gold at “fair value” as defined in Topic 946. Instead, the Trust recorded its investment in gold at the lower of cost or fair value in accordance with ASC 330, Inventory and ASC 270, Interim Reporting. Following the release of FASB Accounting Standards Update ASU 2013-08, Financial Services—Investments Companies (Topic 946): Amendments to the Scope, Measurement and Disclosure Requirements, the Sponsor has re-evaluated whether the Trust falls within scope and has concluded that for reporting purposes, the Trust is classified as an investment company effective January 1, 2014. 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. As a result of the change in the evaluation of investment company status, the Trust must, from January 1, 2014, present its investment in gold at “fair value” as defined in Topic 946. The adoption of Topic 946 accounting changed the presentation of the Trust’s financial statements prospectively from January 1, 2014 (the date of the adoption), the most significant aspects of which are as follows:
| 1. | Presentation of prior year information has been conformed to the current year accounting standards in the Statement of Assets and Liabilities and Statement of Operations. A Statement of Changes in Net Assets is required and has been presented for the year ended December 31, 2014.
| 2. | A Schedule of Investments is required as of December 31, 2014. The Schedule has also been included as of December 31, 2013, for comparative presentation.
| 3. | Financial Highlights are required for year ended December 31, 2014.
| 4. | As the Trust meets the exemption criteria under Topic 946, a cash flow statement is not required for the year ended December 31, 2014. Since the adoption of the new accounting principle is prospective, the prior years’ statements of cash flows are still presented.
| 5. | Required disclosures under Topic 820, Fair Value Measurements, have been included in the footnotes to the financial statements as of December 31, 2014. December 31, 2013 disclosures have also been included for comparative purposes.
The quantitative effect of the adoption of investment company accounting is presented below:
|  | Value at |  |  |  | Gain / (loss)
|  | December 31, 2013 |  | Value at |  | as a result of
|  | at lower of cost |  | January 1, 2014 |  | change in
(Amounts in 000's of US$) |  | or market value |  | at fair value |  | accounting principle
Investment in gold |  | $ | 1,040,003 |  | $ | 1,040,003 |  | $ | -
2.2. Valuation of Gold The Trust follows the provisions of ASC 820, Fair Value Measurements and Disclosures ("ASC 820"). ASC 820 provides guidance for determining fair value and requires 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 JPMorgan Chase Bank, N.A. (the “Custodian”), on behalf of the Trust, at the Custodian’s Zurich, Switzerland vaulting premises and may also be held at the Zurich, Switzerland vaulting premises of UBS A.G. (the “Zurich Sub-Custodian”) and is recorded at fair value. The cost of gold is determined according to the average cost method and the fair value is based on the London PM Fix. Realized gains and losses on transfers of gold, or gold distributed for the redemption of Shares, are calculated on a trade date basis using cost The London PM Fix price for gold is set using the afternoon session of the twice daily fix of the price of gold by five market making members of the London Bullion Market Association at approximately 3:00 PM London Time, on each working day. Once the value of gold has been determined, the net asset value (the “NAV”) is computed by the Trustee by deducting all accrued fees and other liabilities of the Trust, including the remuneration due to the Sponsor (the “Sponsor’s Fee”), from the fair value of the gold and all other assets held by the Trust. The table below summarizes the unrealized gains or losses on the Trust’s gold holdings as of December 31, 2014 and December 31, 2013:
(Amounts in 000's of US$) |  | December 31, 2014 |  | December 31, 2013
Investment in gold - cost |  | $ | 942,277 |  | $ | 1,040,003
Unrealized loss on investment in gold |  |  | (2,266) |  |  | -
Investment in gold - fair value |  | $ | 940,011 |  | $ | 1,040,003
Effective January 1, 2014, the Trust records its investment in gold at fair value and recognizes changes in fair value of the investment in gold as change in unrealized gain / loss on investment in gold in the Statement of Operations. Prior to 2014, the Trust recognized the movements in value of the investment in gold arising from market declines on an interim basis. Increases in the value of the investment in gold through market price recoveries in later interim periods of the same fiscal year were recognized in the later interim period. Increases in value recognized on an interim basis were not permitted to exceed the previously recognized diminution in value. Unrealized losses at December 31, 2013 were crystallized as realized losses, and the average cost of gold was written down to market value. The per Share amount of gold exchanged for a purchase or redemption is calculated daily by the Trustee, using the London PM Fix to calculate the gold amount in respect of any liabilities for which covering gold sales have not yet been made, and represents the per Share amount of gold held by the Trust, after giving effect to its liabilities, to cover expenses and liabilities and any losses that may have occurred. 2.2. Valuation of Gold (continued) Fair Value Hierarchy Inputs Generally accepted accounting principles establishes a hierarchy that prioritizes inputs to valuation techniques used to measure fair value. The three levels of inputs are as follows:
– | Level 1. | Unadjusted quoted prices in active markets for identical assets or liabilities that the company 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 company’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.
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The investment in gold is classified as a level 2 asset, as the Trust’s investment in gold is calculated using third party pricing sources supported by observable, verifiable inputs. The categorization of the Trust’s assets is as shown below:
(Amounts in 000's of US$) |  | December 31, 2014 |  | December 31, 2013
Level 2 |  |  |  |  |  |
Investment in gold |  | $ | 940,011 |  | $ | 1,040,003
There were no re-allocations or transfers between levels during the period.
2.3. 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 three days of trade date. The table below summarizes gold receivable or payable at December 31, 2014 and 2013:
(Amounts in 000's of US$) |  | December 31, 2014 |  | December 31, 2013
Gold receivable |  | $ | - |  | $ | -
Gold payable |  | $ | 23,493 |  | $ | 5,907
2.4. Creations and Redemptions of Shares The Trust expects to create and redeem Shares from time to time, but only in one or more Baskets (a Basket equals a block of 50,000 Shares). The Trust issues Shares in Baskets to Authorized Participants on an ongoing basis. Individual investors cannot purchase or redeem Shares in direct transactions with the Trust. An Authorized Participant is a person who (1) is a registered broker-dealer or other securities market participant such as a bank or other financial institution which is not required to register as a broker-dealer to engage in securities transactions; (2) is a participant in The Depository Trust Company; (3) has entered into an Authorized Participant Agreement with the Trustee and the Sponsor; and (4) has established an Authorized Participant Unallocated Account with the Trust’s Custodian or other gold bullion clearing bank. An Authorized Participant Agreement is an agreement entered into by each Authorized Participant, the Sponsor and the Trustee which provides the procedures for the creation and redemption of Baskets and for the delivery of the gold and any cash required for such creations and redemptions. An Authorized Participant Unallocated Account is an unallocated gold account, either loco London or loco Zurich, established with the Custodian or a gold bullion clearing bank by an Authorized Participant. 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 represented by the Baskets being created or redeemed, the amount of which is based on the combined NAV 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. Authorized Participants may, on any business day, place an order with the Trustee to create or redeem one or more Baskets. The typical settlement period for Shares is three business days. In the event of a trade date at period end, where a settlement is pending, a respective account receivable and/or payable will be recorded. When gold is exchanged in settlement of redemption, it is considered a sale of gold for financial statement purposes. The amount of bullion represented by the Baskets created or redeemed can only be settled to the nearest 1/1000 th of an ounce. As a result, the value attributed to the creation or redemption of Shares may differ from the value of bullion to be delivered or distributed by the Trust. In order to ensure that the correct metal is available at all times to back the Shares, the Sponsor accepts an adjustment to its management fees in the event of any shortfall or excess. For each transaction, this amount is not more than 1/1000 th of an ounce. As the Shares of the Trust are subject to redemption at the option of Authorized Participants, the Trust has classified the outstanding Shares as Redeemable Capital Shares as of December 31, 2013 and 2012 and as Net Assets as of December 31, 2014. The Trust records the redemption value, which represents the maximum obligation (based on NAV per Share), with the difference from historical cost recorded as an offsetting amount to Shareholders’ Equity. Changes in the Shares for the years ended December 31, 2013 and 2012 are set out below:
|  | Year |  |  | Year
|  | Ended |  |  | Ended
(Amounts in 000's of US$, except for Share and per Share data) |  | December 31, 2013 |  |  | December 31, 2012
Number of Redeemable Shares |  |  |  |  |  |
Opening balance |  |  | 11,750,000 |  |  | 10,750,000
Creations |  |  | 150,000 |  |  | 1,600,000
Redemptions |  |  | (3,150,000) |  |  | (600,000)
Closing balance |  |  | 8,750,000 |  |  | 11,750,000
Redeemable Shares |  |  |  |  |  |
Opening balance |  | $ | 1,930,056 |  | $ | 1,677,363
Creations |  |  | 22,226 |  |  | 268,941
Redemptions |  |  | (418,671) |  |  | (98,455)
Adjustment to redemption value |  |  | (499,866) |  |  | 82,207
Closing balance |  | $ | 1,033,745 |  | $ | 1,930,056
Redemption value per Share at period end |  | $ | 118.14 |  | $ | 164.26
2.5. Realized Gains / Losses Revenues consist of realized gains / losses resulting from the transfer of gold for Share redemptions and / or to pay expenses. Realized gains / losses are recognized on a trade date basis. The primary expense of the Trust is the Sponsor’s Fee, which is paid by the Trust through in-kind transfers of gold to the Sponsor. With respect to expenses not otherwise assumed by the Sponsor, the Trustee will, at the direction of the Sponsor or in its own discretion, sell the Trust’s gold as necessary to pay these expenses. When selling gold to pay expenses, the Trustee will endeavor to sell the smallest amounts of gold needed to pay these 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 London PM Fix. 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 London PM Fix used by the Trustee to value the Trust’s gold. A gain or loss is recognized based on the difference between the selling price and the average cost of the gold sold. Neither the Trustee nor the Sponsor is liable for depreciation or loss incurred by reason of any sale. 2.6. 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 Trust has adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740-10, Income Taxes. The Sponsor has evaluated the application of ASC 740 to the Trust, to determine whether or not there are uncertain tax positions in its major jurisdictions that require financial statement recognition. Based on this evaluation, the Sponsor has determined the Trust’s major jurisdictions to be where it is organized and where bullion is held. No uncertain tax positions have been identified. As a result, no income tax liability or expense has been recorded in the accompanying financial statements. 2.7. Investment in Gold Changes in ounces of gold and the respective values for the years ended December 31, 2014, 2013 and 2012 are as follows:
|  | Year |  | Year |  | Year
|  | Ended |  | Ended |  | Ended
(Amounts in 000's of US$, except for ounces data) |  | December 31, 2014 |  | December 31, 2013 |  | December 31, 2012
Ounces of gold |  |  |  |  |  |  |  |  |
Opening balance |  |  | 865,587.1 |  |  | 1,160,268.7 |  |  | 1,065,686.5
Creations |  |  | 4,907.1 |  |  | 14,786.5 |  |  | 158,216.1
Redemptions |  |  | (83,347.4) |  |  | (305,365.7) |  |  | (59,341.1)
Transfers of gold to pay expenses |  |  | (3,314.5) |  |  | (4,102.4) |  |  | (4,292.8)
Closing balance |  |  | 783,832.3 |  |  | 865,587.1 |  |  | 1,160,268.7
Investment in gold |  |  |  |  |  |  |  |  |
Opening balance |  | $ | 1,040,003 |  | $ | 1,561,925 |  | $ | 1,376,845
Creations |  |  | 6,437 |  |  | 22,226 |  |  | 268,941
Redemptions |  |  | (100,689) |  |  | (412,764) |  |  | (98,454)
Realized gain on gold distributed for the redemption of Shares |  |  | 509 |  |  | 1,081 |  |  | 20,240
Transfers of gold to pay expenses |  |  | (4,195) |  |  | (5,992) |  |  | (7,130)
Realized gain on gold transferred to pay expenses |  |  | 212 |  |  | 464 |  |  | 1,483
Realized loss on investment in gold |  |  | - |  |  | (126,937) |  |  | -
Unrealized loss on investment in gold |  |  | (2,266) |  |  | - |  |  | -
Closing balance |  | $ | 940,011 |  | $ | 1,040,003 |  | $ | 1,561,925
2.8. Expenses The Trust will transfer gold to the Sponsor to pay the Sponsor’s Fee that will accrue daily at an annualized rate equal to 0.39% of the adjusted daily NAV of the Trust, paid monthly in arrears. The Sponsor has agreed to assume administrative and marketing expenses incurred by the Trust, including the Trustee’s monthly fee and out of pocket expenses, the Custodian’s fee and the reimbursement of the Custodian’s expenses, exchange listing fees, United States Securities and Exchange Commission (the “SEC”) registration fees, printing and mailing costs, audit fees and certain legal expenses. For the year ended December 31, 2014, the Sponsor’s Fee was $4,165,756 (December 31, 2013: $5,712,292; December 31, 2012: $7,200,166). At December 31, 2014 $321,355 was payable to the Sponsor (December 31, 2013: $350,601). 2.9 Subsequent Events In accordance with the provisions set forth in FASB ASC 855-10, Subsequent Events, the Trust’s management has evaluated the possibility of subsequent events existing in the Trust’s financial statements through the issuance date. On November 7, 2014, the London Bullion Market Association (“LBMA”) announced it will discontinue the “London Gold Fix” pricing benchmark for gold on March 19, 2015. The London Gold Fix has been the benchmark price for valuation of gold bullion held by the Trust. The LBMA has accepted a proposal by the ICE Benchmark Association (“IBA”) to administer a replacement gold price benchmark mechanism. Commencing March 20, 2015, the IBA will operate an electronic, auction-based, tradable and auditable gold bullion market clearing process that will replace the London Gold Fix. The IBA’s electronic price fixing process, like the current London Gold Fix process, will establish and publish fixed prices for troy ounces of gold twice each London trading day at electronic auctions starting at 9:45 am London time and 3:00 pm London time (“IBA PM Gold Fix”). Commencing March 20, 2015 when the IBA PM Gold Fix is declared operative by the LBMA, on each trading day the Sponsor will use the IBA PM Gold Fix for valuing gold bullion received upon purchase of the Trust’s shares, delivered upon redemption of the Trust’s shares and otherwise held by the Trust. The Sponsor also expects to determine that the IBA PM Gold Fix will fairly represent the commercial value of gold bullion held by the Trust and, effective 60 days after the delivery of notice of such determination to The Depository Trust Company, the registered owner of the shares of the Trust, the “Benchmark Price” (as defined in the Trust’s Trust Agreement) as of any day will be the IBA PM Gold Fix for such day. During this period, no other material subsequent events requiring adjustment to or disclosure in the Trust’s financial statements were identified.

X
- Details
Name: | us-gaap_AccountingPoliciesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18780-107790 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18726-107790 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18861-107790 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18743-107790 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18854-107790 + Details
Name: | us-gaap_SignificantAccountingPoliciesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration