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m2 & Vocus Merger

Hi, just wondering if Sharesight will account for the merger or will I be required to enter the merger manually? If so can someone point me to some directions on applying the merger entries. Thanks Brad
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    Hi Brad,

    Thanks for your email! Unfortunately our corporate action data does not include all of the necessary information to record the M2/Vocus merger. Please find the steps below to assist you in recording the merger manually in your portfolio.

    To record the merger we encourage you to:

    1. Remove M2 from your current portfolio by recording a sale at the cost base so that no CGT is calculated. If you have several trades against your M2 holding, the easiest way to obtain the cost base figure is via the Historical Cost Report.

    2.Record your newly acquired Vocus shares using an opening balance transaction (as opposed to a buy transaction) based on the date that you acquired the shares. This allows you to enter a cost base which is used for CGT reporting (the original cost base of your M2 shares in this case), but performance reporting will be calculated based on the change in market value from the opening balance date.

    Important to keep in mind! Using this approach makes for your CGT report to not account for any CGT discount if you choose to sell your Vocus shares in the next 12 Months. Sharesight does not have an ideal solution for this at present unfortunately - the workaround solution would be either to backdate the opening balance date as required when you run the CGT report or to download the spreadsheet version of the CGT report and make a manual adjustment.

    Please note that the information above is provided for your assistance regarding use of Sharesight and does not constitute specific taxation advice and should not be relied upon as such.

    Cheers,

    Emma
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  • I’m happy
    What extra information do you need? 1 x mtu share = 1.625 Vocus shares.

    Also I am curious as to why you would record the sale at today's prices, this will throw out all your CGT calculations by showing a capital gain in this year that does not yet exist (The transaction receives CGT relief)

    Why can you not sell out of MTU at a 0 profit then record the VOC shares as a buy on the date that you acquired the MTU shares thus recognising the capital gains tax discount (assuming you have one) and the fact that no sale occurred this financial year.

    Given the whole idea of this system is to allow us to press print and hand the amounts over to the accountant, showing a capital gain that does not exist is counter-productive is it not? Or am I missing something?

    Thanks
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  • Hi Emma,

    My thoughts are the same as Andrew's, recording at today's price creates a CGT event. This is not the case as the merger receives CGT relief. I tried entering the sale of MTU at the cost price and merger date creating 0 profit however entering the purchase of VOC at the same price and merger date resets the CGT discount date and also creates some very large and strange profit in the portfolio.

    As I see it the only way to record this is to enter the transactions at the purchase date of the MTU share. This would however alter the portfolio performance history and is not a true representation of the transaction.

    Is there not a simpler way to handle this type of merger?
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  • Hi Brad and Andrew,

    Thanks for your posts! I will enquire with one of my colleagues and get back to you shortly.

    Thanks again for posting your questions and I will keep you posted!

    Cheers,

    Emma
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  • Brad and Andrew

    Thanks for your input on this.

    You are correct that this transaction qualifies for roll over relief and therefore it is
    appropriate to remove M2 from your current portfolio by recording a sale at the cost base so that no CGT is calculated. If you have several trades against your M2 holding, the easiest way to obtain the cost base figure is via the Historical Cost Report.

    To record your newly acquired Vocus shares I would suggest using an opening balance transaction (as opposed to a buy transaction) based on the date that you acquired the shares. This allows you to enter a cost base which is used for CGT reporting (the original cost base of your M2 shares in this case), but performance reporting will be calculated based on the change in market value from the opening balance date. The one caveat to this approach is that your CGT report will not account for any CGT discount if you choose to sell your Vocus shares in the next 12 Months. We don't have an ideal solution for this at present unfortunately - the workaround solution would be either to backdate the opening balance date as required when you run the CGT report or to download the spreadsheet version of the CGT report and make a manual adjustment.

    I will edit Emma's original reply to avoid any further confusion.
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  • Appreciate your efforts Scott but surely this can happen magically behind the scenes without these workarounds. It's a bog standard script based acquisition??
    • Hi Chris,

      We handle events that adjust within the original holding, however events that result in the creation of a new holding are typically more complex.

      As Emma mentioned, we typically don't get all of the necessary information in our ASX data feed, for example whether rollover relief is applicable, or the necessary cost base adjustments in the case of demergers.

      Even with the relevant data available, creating a transaction for these events is also a bit more complex than multiplying quantity by a cents per share figure from our data feed. In this case need to calculate the cost base of one holding to use as the basis for the transaction value in another. We also need to consider things such as whether your portfolio already contains the holding or not, and the appropriate way to record a certain event can often differ entirely depending on the tax residency of the customer.

      Please note that I am not suggesting that this is a problem without a solution, and I do sympathise with your sentiment - I just wish it was as easy as it sounds!
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  • 2
    Why would you not record the new Vocus shares at the date of acquiring the old MTU shares, thus giving correct CGT discount info in the reports. The note section can be used to record the reasoning.

    Also if you hold Vocus shares that predate these an opening balance would not work would it?

    Finally would it not be prudent to have a drop down box for that recognises mergers? It would seem more common than other options that you have.
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    • Andrew-
      Yes, recording Vocus at the purchase date of the MTU shares is an alternative approach and this would be required if you already hold Vocus shares, since you can't have transactions that pre-date an opening balance. You would need delete/reject any irrelevant system created unconfirmed dividend transactions in this case as Mike says.

      Mike -
      Please get in touch with us via our customer support channel if you ever have a large number of transactions that you'd like to copy from one holding to another as we have a function to to this at our end.

      I know that deleting a whole bunch of system created transactions is also a bit painful at present. We have a bulk confirm action already, I will see if we can add a bulk reject function in there too.
    • Hi Scott,

      I have acquired my MTU holdings over a period of time and have also participated in the Dividend Reinvestment Plan. This means I cannot use the two step workaround because I am prevented from entering an opening balance.

      Is there any simpler way / work around to replicate this merger action in Sharesight?
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  • 1
    Now I am a little confused as I held both Vocus & M2. If I am reading this right what I need to do is.

    1. Record a sale of M2 at the merger date for the cost price so as not to create CGT event.

    2. Record a purchase of Vocus at the purchase date of M2 for the cost of M2.

    3. Delete unconfirmed dividend transactions. How will this work as I already have dividend transactions for Vocus?
    • Hi Brad,

      Sorry for any confusion. Your points one and two are correct.

      To clarify point three - as long as your existing Vocus dividends have been confirmed, no new automatic dividends will be created and no existing dividend records altered for the period that you have owned Vocus. If your initial M2 transaction pre-dates your initial Vocus transaction, then some automatic dividends may be created for the period between the backdated M2 transaction and the original Vocus acquisition. In this case you will obviously want to remove these transactions. Hopefully that makes sense!
    • The purchase dates for VOC & MTU are the same (02/09/2014)

      I have done both transactions as per point 1 & 2. There does not appear to be any extra automatic dividends to remove.

      Having entered the purchase for VOC dated (02/09/2014) and the sell for MTU dated (22/02/2016), will this overlap not cause any issues with portfolio performance calculations?
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  • I'm a bit confused by all of this. I've done as suggested:
    1. Closed out MTU by entering a sale on Feb 22nd using the "historical cost" report to get the closing balance

    2. Created a new holding of VOC using an opening balance on Feb 22nd using the same amount from the "historical cost" report but setting the quantity as 1.625 * the MTU holding

    Was this the correct way to have enter this in? If so, I understand that the VOC performance will only be tracked from Feb 22nd onwards but my impression is that the gains made on the MTU holdings prior to conversion to VOC aren't shown via the return on the MTU holding nor on the new VOC holdings. Is that right?
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  • This reply was created from a merged topic originally titled How to register MTU/VOC merger being a MTU shareholder?.

    I had MTU shares that have now been converted into VOC shares. How do I reflect that in my sharesight portfolio so that historical cost is properly recognised?
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  • This reply was removed on 2016-02-29.
    see the change log
  • I’m Frustrating
    I note that, unlike the MTU page in Sharesight, the Vocus page does not have a tab for Corporate Actions. One is unable to view the Dividend History nor the up coming dividend.
    Does someone in Sharesight need to pull the switch ?
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  • I trust making a reply to the questions re the M2 capital gain not showing, and there being no Corporate Actions tab on the Vocus page, have not been overlooked!
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  • Hi John,

    Thank you for your post, this issue is definitely not overlooked and our developers are looking into it right now. I will keep you updated shortly on progress.

    We dearly apologise for the inconvenience!

    Cheers,

    Emma
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  • Hi John,

    The issue with the corporate actions window not showing for an opening balance for VOC and MTU has been fixed.

    Thanks ever so much for your patience!

    Cheers,

    Emma
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  • Hi Emma,

    Good to see that the Corporate Actions tab is now showing up in Vocus.
    Am I correct in presuming that the M2/Vocus Capital Gain not showing up matter, is still being worked on ?

    I look forward to its resolution.

    Thanks,
    John Wilkinson
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  • I’m confused
    I am very confused actually. There is advice, but it looks a bit much for me,
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  • I’m Satisfied
    Thanks for the advice.

    Okay, done the trade. I guess the sell at base price will show a loss on the day of sale, but the buy at revised base price will show as a gain on the same day, so overall should be correct. The result seems to look okay.

    I trust that you are working to put together a long-term solution to this type of transaction (even if we have record it as an acquisition - Scrip and/or Cash) where one set of shares is transferred for another. I am happy as a user to enter the information if your feeds don't have the data. I guess as you get bigger, with more users you can probably bear the expense of looking this stuff up and doing an auto conversion for your customers - it will probably use less time and cost for you than trying to teach each user how to do it ourselves. (along with the errors that we will inevitably introduce).

    Cheers

    Stuart
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  • I’m disappointed
    Sharesight's landing page claims that sharesight "automatically records corporate actions". I find it very disappointing that sharesight has not handled this relatively straightforward transaction automatically.
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  • 1
    Hello Corporate Actions Desk,
    In your post on 7 April 2016 you wrote:
    How to handle the M2 Vocus merger
    On 5 February ASX-listed telecom companies M2 and Vocus announced a merger to create the region’s 4th largest telco by market cap and to realise cost savings by combining operations.
    Fortunately, Sharesight makes it easy for investors to handle corporate actions, even complicated demergers, and to track the capital gains tax implications. Using Sharesight to track this merger will also maintain an accurate record of your portfolio performance.
    My thoughts are as follows:
    1. I think the heading, to accurately describe the instructions given, should be changed to read:
    How to handle the M2 Vocus merger to account for CGT
    2. The announcement of the merger was made to the market on 28 September 2015, not 5 February (2016).

    3. Following the instructions you give does not maintain an accurate record of one’s portfolio performance because as you state:
    “ .... but performance reporting will be calculated based on the change in market value from the opening balance date.”
    The capital gain made on the M2 shares is not reported by Sharesight because the instructions state to use “cost base” as the selling price.
    For those who followed James Cornell’s recommendation back in 2006 this is a major omission as it leaves a magnificent gain unrecorded.
    Now I am not concerned about CGT reporting so I have entered the M2 at a sell price of A$12.17, being the close on the last day, 8/2/2016, of M2 trading on the ASX; and used that figure to calculate the ingoing cost, A$7.4892 for the Vocus shares allotted to me.
    The Vocus shares ex M2 commenced trading on the ASX on 23/2/2016 so I have used that date to record their “purchase”.
    The magnificent gain on M2 has now joined the growing magnificent gain on Vocus in being reported – BUT Sharesight needs to do some more work to live up to the claims being made.
    Regards,
    John Wilkinson
    • Angela Thompson (Digital Marketing Manager) April 08, 2016 04:43
      Thanks for your feedback. I've updated the blog in terms of the title and announcement date. I'll let one of my colleagues comment on your third point.
    • Thank you John Wilkinson for providing an intelligible solution to this corporate action we are paying Sharesight to handle for us... I'm very disappointed that this is not automated as you rightly point out it should be as well and also frankly annoyed with the terrrible instructions from Sharesight that result in an incorrect performance assessment - again, the actual purpose of the program we are paying for.
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  • If I just hold Vocus shares, do I need to do anything?
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  • Hi Craig,

    Thanks for your post! If you just own Vocus shares you do not have to action anything. However, the merger of MTU/Vocus might influence the return on your Vocus shares. To read more about this please login into your account > click into your Vocus holding > scroll down and click on 'Livewire News' for tailored news concerning the Vocus and MTU merger.



    Have a lovely afternoon Craig!

    Cheers,
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  • Hi Scott,

    It all seems a bit confusing here. I own a couple of parcels of shares in M2 so I decided to test it out.
    I am not from the IT or finance industry and I only come to Sharesight once a year, so please correct me if I am wrong.
    I had a look at the taxation implications for Australian investors in the merger booklet.
    Under the merger, M2 shares are considered to be sold and New VOC shares are considered to be bought on the implementation date at market price. But if I am entitled to rollover relief, M2 shares are morphed into New VOC shares without a sale taking place.

    For this example, let's say I bought one parcel of shares. It appears that what I require to adjust for the merger is as follows.
    1) Merger implementation date = 22/02/2016
    2) Bought 1000 M2 on 01/03/2013 at $4.20/share. Cost base of M2 = $4200
    (excluding brokerage for simplicity)
    3) 1000 M2 shares became 1625 New VOC shares.
    (1 M2 share becomes 1.625 New VOC shares)
    4) Market value of New VOC shares on 22/02/16 = $12350.
    (It looks like the closing price on this date was $7.60 per New VOC shares)

    A) According to the booklet, if I am not eligible for rollover relief, or if I do not want rollover relief, then I record the sale of 1000 M2 on 22/2/16 at $12350, and then record a BUY of 1625 New VOC shares on 22/2/16 with a cost base of $12350. This is the actual transaction. Performance report is not affected in any way.

    B) However, I am eligible for roll-over relief and I am entitled to capital gains tax concession of 50% or 33.33 % so I would choose this option. Sharesight doesn’t allow me to morph M2 into New VOC shares, so I would get around this by entering a sale of this parcel of 1000 M2 at the cost base of $4200 on 22/2/16 so that there is no capital gain recorded for M2. Then I would enter a BUY for my 1625 New VOC shares also at the M2 cost base of $4200 on 22/2/16. The M2 parcels were bought on different dates, so I would have to do this for every parcel bought.

    With the merger, the implementation date was on 22/2/16 but with the rollover relief, I am deemed to have acquired my New VOC shares on my initial M2 purchase date of 01/03/2013. At present, Sharesight is unable to use deemed dates of purchases. It calculates everything on actual dates. So if I were to sell my New VOC shares before 22/2/17, the Sharesight capital gains tax report would not give me CGT concession that I am eligible for.

    This means that I would have to leave myself a REMINDER for the 2016 and 2017 returns, that if I were to sell my New VOC shares before 22/2/17, then I would have to look at the dates of initial purchase of M2 parcels of shares and manually adjust the capital gains tax report to reflect any CGT concession that I am eligible for. Seems difficult if you have multiple parcels. A good suggestion given here was to backdate the BUY date of the New VOC shares to the initial purchase date of 01/03/13, generate and save the capital gains tax report for the tax return, then reset it back to 22/2/16. If I were to sell my New VOC shares after 22/2/17, then I don’t need to do anything.

    There is a small catch when you use this method (B). Although the performance report of the whole portfolio looks correct, this is not true of the performance report of the individual stocks, as I had to manipulate dates and prices. So now I've got New VOC shares that has gained 240% instead of 17% since 22/2/16. My trading history also shows that my M2 earned 8% per annum when it actually earned 74% per annum. I can live with this, because I know what happened and I'm more interested in getting the capital gains tax concession. There is an alternative way if you want fully correct performance report and rollover relief. For the example above, you could enter the transaction as A) above, but when you end up selling New VOC shares, you must change the purchase date to 01/03/13 and change the cost base to $4200, run and save your capital gains tax report for the tax return, then reset it straight back to A). Would be difficult to remember if you sell it in 10 years time!

    Personally, I am not keen to enter the opening balance/buy transaction for my New VOC shares at the initial M2 purchase date of 01/03/13 as this would affect a lot of my previous reports from 01/3/13 to 21/2/16.
    1) Sharesight would have me owning both M2 and VOC shares in this time period. The performance report during this time period would include the capital gains/loss calculations for both M2 and VOC, when I had only M2 shares
    2) Some time in the future, I may need to access my previous years reports. Naturally I would go to Sharesight, and the portfolio/performance report, All trades reports, historical cost reports etc will be different to the ones I used for the tax return. It would then waste me a lot of time to try and find out the cause for the discrepancies.
    3) Sharesight would automate dividend payments from my New VOC shares since 01/3/13 that I would have to delete. If I had already owned VOC shares before the merger and haven't confirmed dividend payments during this period, the New VOC automated dividend payments will be mixed in with my existing VOC dividends. Messy.
    4) I haven't tested to see what happens if the portfolio has already been locked for the previous years.

    I have a few suggestions from all of this:-

    For future development, would you consider a new field - a deemed date of purchase for mergers/demergers? Note that in the BHP demerger, S32 was also deemed to have been acquired from the initial BHP purchase date for capital gains tax purposes. For the example above, when we enter the New VOC shares, maybe you could have a box to enter the ‘Deemed BUY date’ in addition to the BUY date. The only function of this deemed acquisition date would be for capital gains tax purposes. That is, when we generate the capital gains tax report, this deemed date would override the BUY/opening balance date to calculate capital gains tax. Everything else will rely on the BUY/opening balance date as per normal, so that performance reports will be correct and we don't have the problem of conflicting with previous years reports.

    Alternatively, would you consider having a separate additional capital gain report, which would show a true reflection of any corporate action, irrespective of the entity used. There would be no special tax concessions, deemed purchase dates and prices etc so that performance reports would be based on these values and are reliable at the portfolio and individual stock level. The capital gains tax report would be like the current capital gains tax report, with the additional function of the user being able to edit and confirm details which are unique to different entities eg deemed dates and prices.

    A couple of other small points I noted. Entering the opening balance transaction is a bit awkward. When I used the opening balance way of entering the transaction, Sharesight works out the average share price for the transaction, then, you would have to press the little edit link next to ‘market value as at 22/2/16’. Then, you would have to enter the share price to get the cost base. Unfortunately, it only calculates on four decimal points, so my cost base became $4199.98 instead of $4200. It would be much easier if Sharesight is adjusted to allow us to just enter the cost base of $4200, and for Sharesight to enter the rest of the simple calculation. When I entered the New VOC shares with a BUY transaction, Sharesight accepts six decimal points and the $4200 was correctly entered.

    With method B) above, I checked the performance report of the combined M2 and New VOC portfolio (after doing a BUY transaction with New VOC shares) and it appears to be intact doing it this way. On 22/2/16, there is a big capital loss on M2, but this was offset by the big capital gain of New VOC. I noted that the advice often given here is to use the opening balance but when I tested using the opening balance method to enter the New VOC shares, there is no big capital gain ascribed to the New VOC shares on 22/2/16. This is done on the next day on 23/2/16. So the M2 loss and New VOC gains cannot offset each other on 22/2/16 and 23/2/16. This means that if you use the opening balance method and if you ever need to enter the portfolio performance report ending on merger date 22/2/16, or starting from 23/2/16, the result would be grossly incorrect. Would you need to adjust Sharesight so that the effect of using the opening balance method is the same as a buy transaction?

    PS: I apologise for the length of this. Too easy to get carried away with speech recognition software. Only trying to help so that you can develop Sharesight to make it easier for this type of transaction in future.
    • Hi Ideas guy,

      Thanks for your thoughts on this!

      Your summary of the options and issues is correct, and we recognise that we don't have a perfect solution in some cases. We are investigating a couple of different options for making these types of events easier to deal with in future, particularly where rollover relief is applicable. As you have highlighted it's not a straightforward problem. I will post some info on our plans for improvements once we have had a chance to assess the technical viability of the different approaches.
    • Hi Sharesight team, Just wondering if there is any update / developments to the above challenges? Have recently signed up to Sharesight and am having the same issues as discussed here arise.
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  • Hi Franko,

    The short answer is yes. We've been developing a merge 'wizard' whereby from a single user action we create one merge (cancel) transaction eg for MTU and another merge (buy) transaction eg VOC.

    These two events will be 'chained' together and deleting one will result in the deletion of the other.

    So far we've developed a solution that allows for the creation of these two transactions and are now working on some frontend design to make the whole thing user friendly. We still have a fair bit of work to do and haven't yet released this new feature for general use.

    The merge (cancel) transaction behaves a little like a sell with the exception that it will not result in an entry on the CGT report.
    - The cost base of the merged (cancelled) holding will reduce to zero.
    - for performance reasons the value of the 'sale' will be the quantity x market price on the merge date

    The merge (buy) transaction will behave a little like an opening balance transaction whereby the cost base will be 'transferred' across from the merged (cancelled) holding. If you already own shares in the ongoing holding, that's fine, the merge (buy) transaction will just slot in as another buy.

    At least initially the 'value' of the merge (buy) transaction will match the value of the merge (cancel) transaction to ensure that we don't lose any difference when calculating performance gains.

    The initial release will not deal with rollover relief, but that will be the next step.

    This first release will not have all the features we would like, but even initially we do think it will tackle many of the issues faced when dealing with these types of mergers.

    Regards
    Ben
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  • Hi Ben, I'm liking the idea but not the implementation. If Sharesight is going to provide a solution then its needs to work end to end as the purchase dates in this case (rollover relief) need to be part of a solution else the capital gain reports will all be wrong and you'll just end up creating a mess as its will be unlikely that this will be the only share sold in a portfolio.

    By creating an opening balance you are only delaying the management of the problem till you sell the new asset. An opening balance and a sale will create an incorrect capital gain tax report.

    So say you release this as described with an "Opening Balance" then how do you implement the final solution where you take into account the purchase dates (Rollover relief) - in short you won't be able to without a significant piece of work so you'll take all your early adopters of your solution and leave them exactly in what state?

    I agree for the "Sell" Side of the demerger / takeover you can do this on a single date using average price of the cost base so for those of us that link to Xero you can remove this from your asset base ...

    But on the "Buy"Side of the demerger / takeover you need to carry the dates and the parcel sizes for rollover relief and the rules are often quite complex in regards to in particular the pre-CGT Shares. And while you could bundle these pre 1985 transactions you can't bundle the rest but you should know all the data from the file. I admit this is not easy as I do this manually myself and when you have a share with this and DRP and perhaps 20-40 purchase dates and its not 1 for 1 its a bloody nightmare - but hey that is why you guys are paid the big bucks ...

    This is going to happen quite a lot in the bond market as CBAPx rollover to CBAPy so it would be a really handy feature. It not just the messy corporate takeovers and demergers .. And for the most part these are pretty simple, Of course if you've bought the bond not at issue your likely recording a loss or gain on the purchase.

    My only advise is don't release something that is only is part working better to wait till you have a fully working solution.. Cheers Mike
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  • Hi Mike,

    Thanks for your comments.

    At this stage we are looking at two options for carrying the dates of the original purchases. Of those, my preferred option is for us to link back to the merged (cancelled) holding when calculating CGT. We will essentially follow the linked merge (buy) transaction back through to the cancelled holding and reference each of the trades from that merged/cancelled holding.

    This way, we have all the data exactly as it should be and are not duplicating information in the system which always leads to problems.

    Some of the tasks we are currently working on, such as 'chaining' the two events together will help us achieve this.

    In regard to the decision to release either a partial or complete merge solution, we will only release a partial solution if at least some of our clients gain benefit from that early release and we can communicate clearly to everyone else the limitations of the release. Otherwise we will hold off doing so, for the reasons you've pointed out. Either way, I'll take on board your remarks for when we are at the point we need to make a call.

    Thanks again.
    Ben
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  • Hi,

    Can someone please advise on my situation with regard to the MTU VOC merger - I've only just now sat down to work through this and after spending hours on it am no more clear than I was at the beginning.

    I followed the instructions written out above:
    1. Work out the MTU cost base
    2. Sell MTU on the date of the merger at the price I paid per share = Cap Gain of $0.
    3. Purchased VOC on the date of the merger at the cost base of the MTU shares (same cost base as used for the sale of MTU)
    4. When I look at the portfolio using 'since first purchase' I get a loss on VOC of almost 14K (I have 4,253shares). But this just doesn't add up to the reality of my portfolio performance, which when I add up the price paid for MTU ($15K) and the current value in my e-trade account of VOC ($16.5K) I am overall at least not losing money (up 1.5K). Sharesight shows me as 14K in the hole.

    Could someone please advise on what I am doing wrong or missing here?

    Thanks!

    Russell
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