Booking fund unit movements

Fund units are generally accounted for in the same way as shares when they are purchased or sold. However, funds may involve specific transactions such as:

• subscriptions
• redemptions
• distributions
• reinvested distributions
• accumulation units
• switches or conversions between fund classes
• splits or consolidations.

Each fund is identified by an Item and linked to the Investment Balance Sheet Account assigned to that Item. Transactions affecting the number of units are recorded using the corresponding Item, Quantity, and Unit Price.

For funds, the price per unit is often referred to as the Net Asset Value (NAV). The NAV represents the value of one fund unit and can be used as the Unit Price when recording subscriptions, redemptions, reinvestments, and other transactions involving fund units.

Subscriptions and Redemptions

Subscriptions and redemptions of fund units are recorded in the same way as purchases and sales of shares.

A subscription increases the number of units held and the book value of the investment. Record the additional units as a positive value in the Quantity column and use the Investment Balance Sheet Account assigned to the Item.

A redemption decreases the number of units held. Record the redeemed units as a negative value in the Quantity column. If the redemption value differs from the book value of the units redeemed, the difference is recorded as a realized gain or loss on the investment.

For foreign-currency investments, a redemption may also generate a realized exchange rate gain or loss.

For detailed instructions on purchases and sales, see Booking Share Movements. For the calculation of realized gains or losses, see Calculate Sale Data.

Distribution / Income Units

Income or distribution units periodically distribute income to the investor without changing the number of fund units held.

Record the amount received as investment income and the corresponding increase in the bank account.

If taxes, withholding taxes, commissions, or other charges are deducted from the distribution, record them on separate rows using the appropriate accounts.

Accumulation Units

Accumulation units do not normally distribute income in cash. Instead, the income generated by the fund is retained within the fund and reflected in the value of the units.

Because no additional units are normally issued and no cash is received, the quantity held does not normally change.

If the accumulated income must be recognized separately for accounting, tax, or reporting purposes, record the required adjustment according to the applicable accounting and tax treatment.

Reinvestment

When a distribution is reinvested, the distribution income is used to acquire additional fund units instead of being paid out to the investor.

Record the investment income and the acquisition of the additional units as separate accounting components of the transaction. The acquisition increases both the Quantity and the book value of the investment, even when there is no net movement on the bank account.

The quantity of additional units is calculated as:

Reinvested amount / Unit Price (NAV) = Additional units

For example, if USD 100 is reinvested at a NAV of USD 50 per unit, 2 additional units are acquired. If the NAV is USD 37.50, 2.6667 additional units are acquired.

Fund quantities can therefore include decimal units.

Switch / Conversion

A switch or conversion transfers an investment from one fund or fund class to another. The accounting treatment depends on whether the operation is treated as a sale and subsequent purchase or as an internal transfer.

If the switch is treated as a sale and purchase, record the decrease of the old Item and the acquisition of the new Item as separate investment movements. Any applicable realized gain or loss, and for foreign-currency investments any realized exchange rate gain or loss, must also be recorded.

If the switch is treated as an internal transfer, decrease the Quantity of the old Item and increase the Quantity of the new Item. Transfer the corresponding book value from the Investment Balance Sheet Account associated with the old Item to the Investment Balance Sheet Account associated with the new Item. No realized gain or loss is recorded if the transaction does not constitute a realization.

If both Items are assigned to the same Investment Balance Sheet Account, the transfer changes the quantities and book values associated with the Items without changing the overall balance of that account.

For Items denominated in different currencies, the transferred values and any exchange rate differences must be recorded according to the accounting treatment applicable to the conversion.

Split / Consolidation

A split or consolidation changes the number of fund units held without changing the total book value of the investment.

• In a split, the number of units increases and the book value per unit decreases proportionally.
• In a consolidation, the number of units decreases and the book value per unit increases proportionally.

No cash movement and no realized gain or loss are normally recorded.