The Global Investment Performance Standards (GIPS) were established to provide a framework for investment performance reporting and to ensure fair representation and full disclosure of investment performance. Understanding the GIPS is essential for investment firms aiming to promote transparency and integrity in performance reporting.

With GIPS, firms can present their performance results in a standardized way, which makes it easier for investors to make informed decisions. It encompasses various principles including the requirement for firms to adhere to the standards in order to claim compliance.

In this context, which of the following statements best describes GIPS?