Overview
Rounding may occur when the entitlement to a rights issue is either exercised or have lapsed.
When bank or investment transactions are rounded, the debit or credit value uploaded via a bank feed may not identically match the unrounded corporate action transaction. This would prevent you from matching the two transactions together.
Example
Rights to 142,857 units of OGX were issued. These are either exercised/lapsed on 24/01/2017 with an offer price of $0.07 per unit.
- The entitlement is exercised. Payment of $10,000 is made for the rights issue. However, because 142,587 * $0.07 = $9,999.99, the transactions cannot be matched together:
- The entitlement lapses. If the premium received is also $0.07 per unit, this would cause the same issue:
Solutions
The two options available to resolve rounding are to either post an adjusting journal or to manually process the corporate action through a journal.
These are outlined below in sections based on whether the entitlement is exercised or if the entitlement lapses.
Option 1 – Posting an adjusting journal:
After the corporate action has been processed via the corporate actions screen, navigate to the Transaction List:
From the Main Toolbar, go to Accounting. | |
Select Transaction list |
- Select New Transaction. From the drop-down list, select Journal.
- Post the journal increasing the cost base of the new investment by the rounding amount, matching the transaction against 94910.
E.g. The transactions recorded as per the earlier example would be as follows:
Account Units Debit ($) Credit ($) 77600/OGX.AX 0 0.01 94910/Investment Movement Data Clearing Account 0.01 - On the right side under "Actions", click match next to the corporate action, bank transaction, and adjusting journal. This will prompt you to match these all together:
The resulting journal should look similar to this:
Option 2 – Manually process the Corporate Action:
- Navigate to the Transaction List:
- From the Transaction List screen, select New Transaction. From the drop-down list, select Journal.
- Manually input a transaction depending on the outcome for the rights issue:
As per the previous example, you can manually process the corporate action by inputting the following:
Account | Units | Debit ($) | Credit ($) |
---|---|---|---|
77600/OGX.AX | 142857 | 10000 | |
77600/OGXND.AX | 142857 | 0 | |
94910/Investment Movement Data Clearing Account | <blank> | 10000 |
Option 1 – Posting an adjusting journal:
After the corporate action has been processed via the corporate actions screen, navigate to the Transaction List:
From the Main Toolbar, go to Accounting. | |
Select Transaction list |
- Select New Transaction. From the drop-down list, select Journal.
- Post the journal as a credit to dividends received for the total amount of rounding, matching the transaction against 94910.
E.g. The transactions recorded as per the earlier example would be as follows:
Account Units Debit ($) Credit ($) 23900/OGX.AX <blank> 0.01 94910/Investment Movement Data Clearing Account <blank> 0.01 - On the right side under "Actions", click match next to the corporate action, bank transaction, and adjusting journal. This will prompt you to match these all together:
The resulting journal should look similar to this:
Option 2 – Manually process the Corporate Action:
- Navigate to the Transaction List:
- From the Transaction List screen, select New Transaction. From the drop-down list, select Journal.
- Manually input a transaction depending on the outcome for the rights issue:
As per the previous example, you can manually process the corporate action by inputting the following:
Account | Units | Debit ($) | Credit ($) |
---|---|---|---|
77600/OGXND.AX | 142857 | 0 | |
23900/OGX.AX | <blank> | 10000 | |
94910/Investment Movement Data Clearing Account | <blank> | 10000 |