Investco Texts - A Limited Company as an Investor's Tool

[Investco_Sampsa]

@yetex

As a novice owner of an investment/holding company, I’m pondering the following detailed question, for which I’d appreciate some help. Namely, how should securities trading transaction costs be accounted for in bookkeeping and taxation? I know that transaction costs can be included in the acquisition cost of securities, but is this mandatory, or can the costs also be recorded directly as an expense for the financial period?

For example, if an investment company acquires ETFs through Nordnet’s monthly savings plan, a €2.5 fee is incurred for each purchase. If there are, say, 4 securities under the monthly savings agreement, it seems completely unnecessary to allocate that €2.5 fee to the four securities in proportion to their acquisition costs. This also makes it more difficult to track the true acquisition costs through the balance sheet. In my opinion, it would be much clearer in general, and especially with such small sums, to record purchase and sale commissions directly as an expense for the financial period in the income statement, rather than accounting for them through the balance sheet. However, is there any point in accounting or tax regulations that would specifically prohibit acting this way?

The investment assets are recorded in the company’s accounting as investments in fixed assets / other assets, if this is relevant. Thanks in advance for your help!

The correct way would probably be to record the acquisition costs as part of the acquisition cost on the balance sheet. However, if there are no other issues, I would apply the principle of materiality here, given the small amounts, and for simplicity, record those commissions on the income statement as you suggested. Other issues could be, for example, that when you eventually dispose of those ETFs and calculate capital gains/losses, the broker’s capital gains calculation might differ from your accounting by the amount of the expenses. On the other hand, it’s not a problem to adjust a small difference through the income statement even at that stage.