--- title: "Capitalising or expensing transaction fees" slug: "capitalising-or-expensing-transaction-fees" updated: 2026-07-30T06:56:51Z published: 2026-07-30T06:56:51Z canonical: "support.lusid.com/capitalising-or-expensing-transaction-fees" --- > ## Documentation Index > Fetch the complete documentation index at: https://support.lusid.com/llms.txt > Use this file to discover all available pages before exploring further. # Capitalising or expensing transaction fees In this tutorial we’ll create three transaction portfolios with different capitalisation treatments for fees incurred by the same equity purchase transaction, and examine the impact on cost and P&L. - AllCap portfolio: All four transaction fees are capitalised - AllNonCap portfolio: No transaction fees are capitalised (that is, all are expensed) - Mixed portfolio: Broker and exchange fees are capitalised; clearing and NFA fees are expensed. The four fees are calculated as a percentage of gross consideration as follows: - Broker fee: 5% - Exchange fee: 2% - Clearing fee: 2.5% - NFA fee: 0.5% > **Note**: For an implementation using the Python SDK, see [this Jupyter Notebook](https://github.com/finbourne/finbourne-notebooks/blob/main/V3/product/ibor/Capitalising%20or%20expensing%20transaction%20fees.ipynb). ## Creating a transaction fee type for each fee We must create a [transaction fee type](/v1/docs/how-do-i-create-a-transaction-fee-type) for each fee that determines: - The formula by which LUSID should calculate the fee amount - Whether the calculation is always performed, or subject to a condition - A storage location for the result, which must be a property in the `Transaction` domain that LUSID can populate on the [output transaction](/v1/docs/input-and-output-transactions). For example, for the Broker fee: ```json {  "displayName": "Broker fee",  "calculation": {    "formula": "Properties[Transaction/default/GrossConsideration] * 0.05"  },  "condition": "True",  "txnPropertyKey": "Transaction/Fees/Broker" } ``` ## Adding a calculation for each fee to the transaction type Imagine we have a `BuyWithFees` transaction type for equity purchases that calculates: - Gross consideration as units * price in settlement currency. From this, LUSID automatically calculates gross trade amount in transaction currency. - Total consideration as gross consideration + total fees in settlement currency. From this, LUSID automatically calculates trade amount in transaction currency. [More about transaction amounts](/v1/docs/transactions-and-manual-vs-automatic-calculation-of-amounts). This transaction type currently has two movements: - The `StockMovement` uses `Side1` to increase an asset holding by the number of units at the trade amount cost. - The `CashCommitment` uses `Side2` to decrease a cash holding by the total consideration. [More about built-in sides](/v1/docs/what-built-in-transaction-types-and-sides-are-provided-with-lusid#builtin-sides). We must add a [Fee calculation](/v1/docs/what-is-a-transaction-type-calculation#fee-calculation) to the transaction type for each fee to determine whether it is capitalised or expensed. Note that LUSID automatically: - Includes capitalised fees in the trade amount. Since we are using `Side1`, this means capitalised fees are added to the cost basis of the asset holding. - Does *not* include expensed fees in the trade amount, so using `Side1` this means they do *not* impact the asset cost basis. Instead, we recommend adding a `Carry` movement to the transaction type to yield the correct P&L accounting treatment. - Calculates fee totals and stores the results for use in other calculations and operations as follows: | Fee total | System property | Shortcut | | --- | --- | --- | | All fees | `Transaction/default/TotalFees` | `Txn:TotalFees` | | All capitalised fees | `Transaction/default/TotalCapitalisedFees` | `Txn:TotalCapitalisedFees` | | All expensed fees | `Transaction/default/TotalNonCapitalisedFees` | `Txn:TotalNonCapitalisedFees` | Our amended `BuyWithFees` transaction type might look like this: ```json {  "aliases": [    {      "type": "BuyWithFees",      "description": "Transaction type for equity purchases with fees",      "transactionClass": "Trading",      "transactionRoles": "LongLonger",      "isDefault": false    }  ],  "movements": [    {      "name": "Increase asset units and cost",      "movementTypes": "StockMovement",      "side": "Side1",      "direction": 1    },    {      "name": "Decrease cash units and cost",      "movementTypes": "CashCommitment",      "side": "Side2",      "direction": -1    },    {      "name": "Report expensed fees as P&L",      "movementTypes": "Carry",      "side": "CarryNonCapFees",      "direction": -1    }  ],  "calculations": [    {      "type": "Txn:GrossConsideration"    },    {      "type": "DeriveTotalConsideration",      "formula": "Txn:GrossConsideration + Txn:TotalFees"    },    {      "type": "Fee",      "transactionFeeId": {         "scope": "Fees",         "code": "Broker"      },      "transactionFeeCapitalisation": {        "capitalisation": "Conditional",        "capitalisedCondition": "Portfolio.Properties[Portfolio/Fees/Status] neq 'AllNonCap'"      }    },    {      "type": "Fee",      "transactionFeeId": {         "scope": "Fees",         "code": "Exchange"      },      "transactionFeeCapitalisation": {        "capitalisation": "Conditional",        "capitalisedCondition": "Portfolio.Properties[Portfolio/Fees/Status] neq 'AllNonCap'"      }    },    {      "type": "Fee",      "transactionFeeId": {         "scope": "Fees",         "code": "Clearing"      },      "transactionFeeCapitalisation": {        "capitalisation": "Conditional",        "capitalisedCondition": "Portfolio.Properties[Portfolio/Fees/Status] eq 'AllCap'"      }    },    {      "type": "Fee",      "transactionFeeId": {         "scope": "Fees",         "code": "NFA"      },      "transactionFeeCapitalisation": {        "capitalisation": "Conditional",        "capitalisedCondition": "Portfolio.Properties[Portfolio/Fees/Status] eq 'AllCap'"      }    }  ] } ``` The `Carry` movement uses a custom `CarryNonCapFees` side to report expensed fees only as P&L (see the `units` and `amount` fields): ```json {  "security": "Txn:LusidInstrumentId",  "currency": "Txn:TradeCurrency",  "rate": "Txn:TradeToPortfolioRate",  "units": "Txn:TotalNonCapitalisedFees",  "amount": "Txn:TotalNonCapitalisedFees" } ``` ## Loading transactions into portfolios and examining the results Imagine we load an equity purchase transaction with the following characteristics into each of our three portfolios: - Units: 10 - Price: 10 - Gross consideration: 100 - Total fees: 10 - Total consideration: 110 For a demonstration, see the [Jupyter Notebook](https://github.com/finbourne/finbourne-notebooks/blob/main/V3/product/ibor/Capitalising%20or%20expensing%20transaction%20fees.ipynb). ### Holdings The total consideration (cost of the cash movement) is `-110` in all three portfolios. The trade amount is calculated from gross consideration plus total capitalised fees (expensed fees are excluded), so the asset cost differs in each portfolio (in yellow): ![](https://cdn.document360.io/d575ad81-c0ed-4980-bbd1-d59ac5c3de82/Images/Documentation/image-VHPBK322.png) ### Output transactions Fee totals are stored in `Transaction` system properties and automatically populated on output transactions: ![](https://cdn.document360.io/d575ad81-c0ed-4980-bbd1-d59ac5c3de82/Images/Documentation/image-JVKN3GL3.png) ### Valuation Given no other price or FX movement, **Total P&L** is the same in all portfolios but the breakdown between **Market P&L** (capitalised fees) and **Other P&L** (expensed fees) is different: ![](https://cdn.document360.io/d575ad81-c0ed-4980-bbd1-d59ac5c3de82/Images/Documentation/image-DJ2WJY0B.png) ### A2B report Capitalised fees are reported as **CapGains**; expensed fees as **Carry**: ![](https://cdn.document360.io/d575ad81-c0ed-4980-bbd1-d59ac5c3de82/Images/Documentation/image-630AR6SF.png) ### Journal entry lines Capitalised fees are reported as unrealised gain/loss and so LUSID generates journal entry lines with a **sourceType** of `LusidValuation` at period end in addition to `LusidTransaction` lines on trade and settlement dates: ![](https://cdn.document360.io/d575ad81-c0ed-4980-bbd1-d59ac5c3de82/Images/Documentation/image-76NT4RRV.png) ![](https://cdn.document360.io/d575ad81-c0ed-4980-bbd1-d59ac5c3de82/Images/Documentation/image-3BLS3BV7.png) ![](https://cdn.document360.io/d575ad81-c0ed-4980-bbd1-d59ac5c3de82/Images/Documentation/image-VFLCX5AJ.png) ### Trial balance All ledgers balance but the **DR** (debit) and **CR** (credit) amounts differ: ![](https://cdn.document360.io/d575ad81-c0ed-4980-bbd1-d59ac5c3de82/Images/Documentation/image-739BE10K.png)