Transaction fees and capitalisation

LUSID has a transaction fee engine that can automatically calculate transaction fee amounts and decide whether to capitalise or expense them.

Note: A capitalised fee is added to the cost of acquiring (or netted from the proceeds of disposing of) an asset, whereas a non-capitalised fee is expensed as P&L during the period incurred, without impacting the asset’s cost basis.

For example, suppose all equity purchase transactions incur four fees, two of which are capitalised and two not:

• Broker fee and exchange fee: capitalised

• Clearing fee and NFA fee: non-capitalised

To enable this feature:

• For each fee, create a transaction fee type that contains a formula for calculating the fee (for example, 0.5% of book value), and nominates a property in which to store the calculated amount.

• In the transaction type for equity purchases, add a Fee calculation type for each fee to determine whether it is capitalised or not, optionally according to a condition such as the number of units traded or some attribute of the parent portfolio.

• Append a side to the transaction type that handles carry for non-capitalised fees.

Once enabled, for each transaction belonging to the transaction type, LUSID automatically:

• Calculates an amount for each fee and stores it in the nominated property on the output transaction.

• Calculates the total fee amount, the total capitalised fee amount and the total non-capitalised fee amount, and makes these calculations available for use in sides.

• Adds or subtracts just the capitalised fees to or from the asset’s cost basis.