You will be able to process this corporate action type automatically through the Corporate Actions screen in the near future. In the meantime, use the instructions below as a general guide on how to manually process this corporate action type.
Details
The way you process a share buy-back is dependent on the scenario.
You can use the following as a guide on how to record a buy-back manually in Simple Fund 360. Rio Tinto Share Buy-Back will be used as the example. You can also refer to the Telstra Buy-Back 2016 as another example.
Details
Rio Tinto Limited undertook an off-market buy-back of its own shares.
For more detailed information, you can refer to the following documents:
Scenario
In this example, it is assumed that 127 RIO shares have been bought back.
The deemed capital proceeds are $16.78 per share which is the capital component ($9.44 per share) plus $7.34 per share (amount by which the CGT value exceeds the Buy-Back price).
The dividend component amounts to $39 per share.
Refer to the Payment and Dividend Statement received from Rio Tinto for these details.
SF360 allows multiple transactions occurring on the same day to be posted as one journal entry. As all of the following transactions happened on the same date, a single journal entry will be used to record them. Please note that you can split this into multiple journals if you wish.
| Steps | Details | DR | CR |
|---|---|---|---|
| Step 1 | Record the share buy-back ($48.44 per share) | $2131.06 | |
|
Record the difference between the deemed capital proceeds ($16.78 per share) and the capital component ($9.44 per share) = $7.34 per share |
$932.18 | ||
| Step 2 | Enter the Dividend Component ($39 per share) | $4953.00 | |
| Step 3 | Input the Total Bank Receipt | $6151.88 |
In this example, we are going to use Account 37500/RIO to record the difference ($7.34 per share) between the deemed capital proceeds ($16.78 per share) and the capital component ($9.44 per share). As this is a non-deductible expense, we need to change the tax label of Account 37500/RIO.
If you are already using 37500/RIO to record deductible expenses, you can create a new expense account and change the label following the steps below.
To change the label, follow the steps below:
- Go to Accounting | Chart of Accounts.
- Search for and select 37500/RIO.
- Change the Tax Label to Not Applicable - Permanent Difference.
- Select Save.
You can refer to the Non Tax-Deductible Expenses help for more detailed information.
Step 1 - Record the share buy-back
- Go to Accounting | Transaction List.
- Select New Transaction and then Journal from the drop-down list.
-
Input 15/04/2015 in the Date field and input a reference and description. Refer to the Payment and Dividend Statement received from Rio Tinto for more details.
-
Record a disposal to the 77600/RIO account. The consideration amount is $16.78 x number of shares bought back.
-
Review the Disposal Details panel. The contract date has been changed to 07/04/2015 which is the date on which the shares were bought back. Refer to the Payment and Dividend Statement from Rio Tinto for this information.
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Next we are going to record the difference ($7.34 per share) between the deemed capital proceeds ($16.78 per share) and the capital component ($9.44 per share) as a non deductible-expense. On the next line under the Account heading, click into the Search by Account Code/Name and locate Account 37500/RIO.
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Input the debit amount for the expense ($7.34 x 127 = $932.18 in this example).
Step 2 - Record the dividend component
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Refer to the Payment and Dividend Statement from Rio Tinto for payment details and franked amount.
Dividend amount = $39 x number of shares bought back
To record this, select Add line to add a new transaction line. Under the Account heading, search for the Rio Tinto dividend account by typing 23900/RIO in the Select an account box. Input total dividend amount under the Credit column. ($4953 in this example) and review the Dividend Details to ensure they are correct.
Step 3 - Record the receipt to the bank
-
Select Add line to add a new transaction line. Under the Account heading, search for the Bank account by typing 60400 in the Select an account box and input $6151.88 under the Debit column.
- Select Post.