Need user (and accountant) input on advanced portfolio report

[Phil Longstaff]

Andrew Sackville-West wrote:
> Hi list, 
>
> I'm trying to clean up the mess I made of the advanced portfolio
> report a couple years ago. To that end I need some information about
> how it should behave. And yes, I know the report is horribly
> broken... I'm getting most of that sorted, but as part of that I've
> ripped most of the guts out of the report and need help with this
> issue...
>
> The specific question is the handling of brokerage fees. I realise
> there are probably several answers to this and different ways to
> handle it. I'm hoping to get it boiled down to a couple of sane
> choices that could be easily put into a report option.
>
> The first option I see is to completely eradicate evidence of
> brokerage fees. Here is an example: 
>
> Buy 100 shares @10 with a fee of $10. Enter a price a few days later
> of $15 (woo hoo! 50% in a few days!). If I eradicate evidence of the
> fees, it looks like this
>
> symbol shares price basis value moneyin moneyout unrealised-gains realised-gains ...
> foo    100    $15   $1000 $1500 $1000    $0      $500              $0
>
> then later you sell 50 shares at $20, paying a fee of $10 again. but
> again, we're eliminating the brokerage fees...
>
> symbol shares price basis value moneyin moneyout unrealised-gains realised-gains ...
> foo    50     $20   $500  $1000 $1000   $1000     $500              $500
>
> This option gives a report that looks *only* at the stocks themselves
> and their performance and ignores what you spent to get that
> performance.
>
> Another option: ignore the brokerage fees in the basis calculations,
> but leave them in the moneyin/out calculations. This sort of
> automatically shows how you did including the fees. so the first
> example above looks like this:
>
> symbol shares price basis value moneyin moneyout unrealised-gains realised-gains ...
> foo    100    $15   $1000 $1500 $1010    $0      $490              $0
>
> where unrealised gains are calculated on the actual money moved not the relative
> difference between current value and basis. you could also continue to
> calculate the unrealised gains using the difference between value and
> basis, so that it remains at $500?
>
> the example after the sale described above
>
> symbol shares price basis value moneyin moneyout unrealised-gains realised-gains ...
> foo    50     $20   $500 $1000  $1010    $990      $490              $490
>
> note that money out is $990 because of the $10 fee taken by the
> broker. 
>
> A third option: include the brokerage fees in the basis
> calculation. I'm not sure I understand all the ramifications of this,
> but here is how I see the examples:
>
> symbol shares price basis value moneyin moneyout unrealised-gains realised-gains ...
> foo    100    $15   $1010 $1500 $1000    $0      $490              $0
>
> in this example, the money in represents the actual money into the
> stock. If the new price hadn't been reported, it would look like this:
>
> symbol shares price basis value moneyin moneyout unrealised-gains realised-gains ...
> foo    100    $10   $1010 $1000 $1000    $0      -$10              $0
>
> and the sale from above
>
> symbol shares price basis value moneyin moneyout unrealised-gains realised-gains ...
> foo    50    $20   $505  $1000 $1000    $1000      $495              $495
>
> Another possibility: put all the fees into their own column. That way
> the user could determine what do to with the fees. In that particular
> case, I would suggest that the fees be ignored in the other columns,
> presenting a pure picture of just how the stock performed, and then
> the total fees are presented. 
>
> and so on and so on. There are obviously many many different ways this
> information could be reported. 
>
> I would appreciate some input so that this report can better conform
> to what users expect and need. 
>
> thanks
>
> A
>   
I'm not an accountant, but I think the situation is similar to a 
purchase with tax.  If I buy an asset for $X and pay $Y tax (total cost 
$X+Y), the value of the asset for accounting purposes is $X.  Similarly, 
the cost basis if I pay $X for the shares/units and $Y as brokerage fee, 
the cost basis is $X.  The $Y is an expense associated with that asset.  
If I buy 10 shares at $10 (with $20 fee) and sell at $15 (with $10 fee), 
my capital gain is $50 (10 shares * $5) and an expense of $30.  I think 
I like your 4th option best (fees in their own column).

Phil