Sift flour, baking powder and salt into a large bowl. In another large bowl, cream butter thoroughly and gradually add sugar. Beat until light and fluffy. Add beaten egg yolks to butter mixture and mix well. Add flour mixture, alternating with milk, beating well after each addition and ending with flour. Stir in coconut and vanilla, gently fold in egg whites. Bake in greased 8 or 9 inch cake pans for about 30 minutes or until toothpick inserted in the center comes out clean. Makes 3 layers.
2For the icing, combine first 6 ingredients in the top of a double boiler. Cook over rapidly boiling water, beating with a mixer until mixture stands in peaks. Remove from heat and add vanilla. Continue mixing with mixer until icing is firm enough to hold when spreading. After frosting the cake, immediately sprinkle with grated coconut. Press coconut onto sides of the cake using your hands.