This morning's Wall Street Journal article on PPIP and its unpopularity drives home an upcoming difficulty in the GIPS 2010 changes. GIPS compliant firms will be required to value all portfolios on the date of large cash flows.
The banks are refusing to sell its toxic assets under the PPIP for fear of disclosing its market value and changing the values being shown on their books. Without the market, values for these securities is left to more subjective measures. Yes, even a discounted cash flow model is subjective thanks to the assumption the security will exist until maturity with principal repayment.
How will the GIPS compliant firm determine price in the event one of their portfolios has a large cash flow and these kinds of toxic debt?
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