Tracking cost basis of shares
Mon, 10 Jul 2000 07:51:37 -0500
On Mon, 10 July 2000, Dave Peticolas wrote:
> > While it's quite doable, it's not quite trivial if we want it done with a
> > reasonable degree of efficiency.
> Yes, and we should probably discuss it in the larger context of ...
> The recent ... patch is intended to be used ...
> have only mechanism, ...
> need to develop some policy.
Hey, guys! Does this suggest that we are approaching this problem from the
wrong direction? Instead of implementing mechanisms, perhaps we should first
determine NEED, then POLICY, and finally MECHANISM.
The Corvette, Lexus, and Ferrari are all great cars. But which one do you
BTW, drop off this hay in the south pasture on your way to the 'Baja race.
A few observations:
1) Basically we can view all of these "accounts" as inventories.
For example, a bank account is the inventory of "cents" stored in a
particular bank account.
2) An inventory has three components "quantity", "cost", and "value".
3) Accounting principles require that we apportion the cost when we change
the quantity. However, it is possible to change the cost or the value without
affecting the quantity.
3) "Cost" and "Value" are not the same. The value is composed of two
components, "basis" and "unrealized gain". Fluctuations in the quoted price
affect the "unrealized gain" component, but not the "basis". Return of
Capital affects the "basis", but generally not the momentary "unrealized
4) Just because we CAN treat all "inventories" in one consistent manner does
not necessarily mean that we SHOULD do so. The vast majority of transactions
are in native currency and the ratio of value to quantity is constant.