# Bookkeeping CFDs



## jiggy (14 July 2009)

Anyone know a good bookeeper who can consolidate cfd trading statments?

I need to do my tax and have alot of cfd trades.........the cfd provider i am with doesn't provide a consolidated financial year statement so I'm hoping someone might know of some who is a bookeeper etc that can do it

thanks


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## Uncle Festivus (15 July 2009)

*Re: Bookeeping CFDs*

I asked my accountant this several years ago who advised to just have - opening cash plus deposits less withdrawals & closing cash to work out a consolidated end of year profit/loss value for all trades, if you are classed as a trader by the ATO? Seems to work so far?


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## skyQuake (15 July 2009)

*Re: Bookeeping CFDs*


Should be fairly easy?

Look at ur bank statement for how much u have deposited in to the bucket shops.
Sum those deposits up, and put that figure into the Capital Loss column.

Easy as pie :


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## investorpaul (15 July 2009)

*Re: Bookeeping CFDs*

I find IG Markets really easy for working out overall P/L you can download the file to EXCEL and it shows each trade and your P/L. It breaks everything down including commission, interest, divs, etc and you can even specify the dates for which you want to info.

Then just add you own calc to work out overall P/L

Im not sure if other CFD providers have something similar, but I assume they would?


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## Nemo Data (9 March 2019)

This thread was prepared by Jeffrey Stricke from Nemo Data Pty Ltd – CFD financial transactions specialist

jeffstricke@gmail.com / jeffrey@nemodata.com


Umm you guys wrong – do not work on your accounts further until you have read the following instructions on how to do this properly. Should you feel the below too onerous, please feel free to reach out in order to accept and engagement letter from me. Servicing All Australian Reporters.


*CFD Report of Non Reliance*



You can't rely on the report provided by the CFD provider.


1. They disclaim away liability when producing it, meaning all errors you would report on blindly. CFD providers are humans too, it happens.

2. The level of conflicting interests of the report drafter are at levels too high to articulate.

3. All loses are deductible unless you are engaging in bookie arbitrage


If transactions are processed in line with the afore-threaded discussion, you will *NOT* be in compliance with the Australian reporting requirements.

I am a specialist in this field.


The remarks from the above referring their accountant’s recommendation is not only predictable but completely incorrect as it does not consider the foreign exchange rate gain or losses inherent in ALL Australian derivatives that are not quoted in Australian dollars.


Considering the broad range of products in the market, and the narrow possibility of all debits and credits being recorded in the same currency is just, well, unlikely.


*Worked Example:*


$1,000 transferred to CFD Company for CFD Forex trading with an online platform.
We trade in Forex quoted as AUD/USD
CFDs transactions are all about leverage.
Using leverage and our AUD $1,000:
we enter into a transaction to use AUD 20,000 and purchase AUD/USD
the AUD/USD at the time was quoted as 0.72524 and Converted at 1.
we predicted a downturn in the currency pair and so entered the transaction as a SOLD AUD/USD transaction.
the market then goes through an upswing and we close the position with a BUY Order for 0.72581, converted at 1.38216.

What do you think the accounting entries are for this?

If you got something like:


AUD/USD = Purchased USD $14,504.80        [calc. AUD 20,000 x 0.72524]

USD/AUD = Purchased AUD $19,984.29        [calc. USD 14,504.80 x (1/0.72581)]


Starting  = AUD $20,000.00

Closing   = AUD $19,984.29

Net Loss = AUD $15.71


Looks simple doesn't it. 


*If you arrived at this answer you need to STOP reporting your CFD transactions and contact me immediately to assist you with your bookkeeping.*


jeffstricke@gmail.com & Jeffrey@nemodata.com


*The Correct Approach - THE CORE LOGIC*


To get this right, you have to ignore the currency completely. It's a distraction and has nothing to do with the transactions as put in the above calculations. You need to refocus your mind as to what the transaction actually is. 


The transaction is for a Contract For Difference - Forex. They refer to CFDs as such because that is what you are buying and selling. In this case, the CFDs are referenced to actual Forex Currency Pairs AUD/USD, known as the underlying, and the values from which the CFD pricing is derived (in theory).


So to restate the logic of the worked example:

Rather than using borrowed AUD $20,000 to purchase USD $14,504.80, think of it this way:



You purchased 20,000 c.f.d units in the currency exchange pair AUD/USD at a value of AUD $20,000
Your conversion rate on the c.f.d. was 1. 
The AUD/USD conversion rate took into consideration that for the first part of the transaction element of the CFD product is AUD.
Using AUD to transact in AUD = 1 
You used $20,000 worth of AUD/USD c.f.d. units
At the time of purchase, the SOLD cfd units were priced at 0.72524.
What is the 0.72524?


The 0.72524 is the price assigned by the CFD company which is derived from the underlying Forex market current spot AUD/USD rate. Or put another way,


*it is the price that your CFD company quotes the currency pair to its customers. *


This is readjusted based on the purchasing and selling transaction environment at the time of the CFD Companies customers as well as with reaction to the broader CFD Forex market and Forex market.


So what does that mean for us?


Rather than look at the values of multiplying volumes with values, just take a step back and look at the movement in the currency pairs on sold and purchased.


0.72524 (SOLD) - 0.72581 (PURCHASED) = Movement of -0.00057 in terms of c.f.d points


All you have to do then is: 

-0.00057  (MOVEMENT POINTS) 

x 20,000  (c.f.d. UNITS PURCHASED) 

= 11.40   (LOSS AT STEP 1, STATED IN USD)


This is the part that I think is super sneaky to the whole CFD value realising process is that the CFD Company revalues the 11.40 USD losses on your behalf at a rate different to the one you literally just transacted with reference to.


In the initial details of this worked example, it was stated that the *conversion rate *was 1.38216. That refers to these USD $11.40 losses, which then must equal -$15.756624 so your statement reflects a DEBIT of -$15.76. That is your cash impact.


The difference may not seem like much as it equates to approximately 0.32% banking variances in most basic example where the base currency and your currency are the same AUD/AUD and for only 20,000. These variances multiply out just as leverage does when you increase volume, the number of currency conversions are required to be undertaken, and you will see some transactions on your CFD Company bank statements grow as you succeed in trade.


If not corrected, the relative impact is much greater on your FX unrealised and realised currency gains.


*WE HAVEN'T FINISHED THAT TRANSACTION YET - MORE LOSSES:*


So the CFD Company converted our transaction for us at a: 

rate of 1.38216 or 0.72350 inverted (1 / 1.38216) 


Was 1.38216 better or worse than the actual exchange rate. If better, great, a gain. If not, it's a loss.


FX losses need to be separated out from invoiced a paid realised gains, records the profit of transacting in the actual currency better or worse than the close for that day


Invoiced *Unrealised Gains and Losses *- Sitting on the balance sheet still

Invoices Settled *Realised Gains and Losses* - Accounts for changes in the actual references exchange rates between the dates of raising the invoices and the transaction being settled in full. Appears in P&L.


At the point the balance is reduced on your trading account, you must then review the average exchange rate for the period, which you can find online or through your accounting software hopefully if its up to scratch. Before I state the next part, it can't be relied on as tax advice as I do not hold such registrations and qualifications, however, you can verify the following in your own research as to fact, being that the ATO requires these amounts to be identifiable and accurate for the purposes of collecting and collating statistical information on the country and in effect, one way of analysing our competitiveness as a nation. 


If you need some help or want something clarified, please let me know and I'll be happy to help.


jeffsticke@gmail.com 

cc'd jeffrey@nemodata.com


If you disagree with anything in this outline, please re-read the content again and again until you've got it, as it's not wrong. So don't confuse others with distractions that aren't even on point. Should you want a clarification of any point using your own example on this thread, I'd be happy to review it together.


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## cynic (9 March 2019)

@Nemo Data, are you acquainted with the following?:
https://www.ato.gov.au/law/view/document?docid=TXR/TR200515/NAT/ATO/00001


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## Nemo Data (9 March 2019)

cynic said:


> @Nemo Data, are you acquainted with the following?:



Yes. What's your point?


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## Joules MM1 (9 March 2019)

Nemo said:
			
		

> CFDs transactions are all about leverage




should that read - all about margin - from an accounting/tax perspective ?


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## Nemo Data (9 March 2019)

Joules MM1 said:


> should that read - all about margin - from an accounting/tax perspective ?



No, I've used the term correctly. It is a leveraged position. Margin is the amount of leverage the CFD company allows you to use in a given CFD contract.


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## Nemo Data (9 March 2019)

Perhaps these types of


Joules MM1 said:


> should that read - all about margin - from an accounting/tax perspective ?[/QUOTE
> 
> 
> Nemo Data said:
> ...


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## cynic (9 March 2019)

Nemo Data said:


> Yes. What's your point?




It seems that the tax treatment of realised losses/gains in respect to Contracts For Difference, may not necessarily be treated identically for all traders. (E.g. retranslation election under section 775-270 of ITAA 1997.)


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## Nemo Data (10 March 2019)

Hi Cynic,

1. Those sections do not apply.
2. CFDs themselves are not forex transactions
3. CFD contracts are not capital in nature.
4. Should you go through the process of having a separate audit for 2 years for as well as having your accounts certified as presented in accordance with Australian Accounting Standards, a rational person my just go the cheaper and more relevant route, of hiring a bookkeeper.

Thanks for the random comment though, I don't mind the exercise.


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## cynic (10 March 2019)

Nemo Data said:


> Hi Cynic,
> 
> 1. Those sections do not apply.
> 2. CFDs themselves are not forex transactions
> ...



I thought you said that you were acquainted with:
https://www.ato.gov.au/law/view/document?docid=TXR/TR200515/NAT/ATO/00001


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## Nemo Data (10 March 2019)

cynic said:


> I thought you said that you were acquainted with:
> https://www.ato.gov.au/law/view/document?docid=TXR/TR200515/NAT/ATO/00001




I don't mean to offend, but its possible we have a miscommunication glitch here as I am not entirely sure we are talking about this same thing on point.

Please shoot me through an email to jeffstricke@gmail.com and we can discuss further rather than clogging up a public board on topics not relevant not helpful to the rest of the community.

Thanks

J


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## cynic (10 March 2019)

Nemo Data said:


> I don't mean to offend, but its possible we have a miscommunication glitch here as I am not entirely sure we are talking about this same thing on point.
> 
> Please shoot me through an email to jeffstricke@gmail.com and we can discuss further rather than clogging up a public board on topics not relevant not helpful to the rest of the community.
> 
> ...



I am not seeking to offend either, but I do believe my input is both relevant, and helpful, to those whom might otherwise be induced into believing that bookkeepers offer the most viable solution, to a matter, which in truth, should ideally require the services of a competent taxation lawyer.


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## Nemo Data (10 March 2019)

cynic said:


> I am not seeking to offend either, but I do believe my input is both relevant, and helpful, to those whom might otherwise be induced into believing that bookkeepers offer the most viable solution, to a matter, which in truth, should ideally require the services of a competent taxation lawyer.




It's a pity you decided not to take me up with my offer. You're dragging me into this, but I tried. I don't know why, are you a CPA or CA?:

A bookkeeper is more than sufficient for the preparation of the grunt work and being accountable for processing the transactions into software, ready for a review by a tax agent, should the client not feel informed enough about the content allowing them to make a decision by themselves.

A bookkeeper can perform the transaction recording duties for this type of business just in the same way they do it for anything else.

Not including the Tax Return, you would recommend charging by the minimum:
Financial Statements Prepared in Accordance with AASB: Accountant's Fees 
+ Audit Fees : Unqualified Statement from an Auditor  sits somewhere between $5,000 - $10,000.

Why would anyone do that?
Paying professional service fees when you could just invite your accountant into your software, where everything is ready for you to go and been prepared by someone who has an inkling of what they are doing, is stupid. If that's what you do, that's your business.


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## cynic (11 March 2019)

Nemo Data said:


> It's a pity you decided not to take me up with my offer. You're dragging me into this, but I tried. I don't know why, are you a CPA or CA?:



Neither of the two - I am an uneducated cynic (in case you hadn't noticed).


> A bookkeeper is more than sufficient for the preparation of the grunt work and being accountable for processing the transactions into software, ready for a review by a tax agent, should the client not feel informed enough about the content allowing them to make a decision by themselves.



That may be true.


> A bookkeeper can perform the transaction recording duties for this type of business just in the same way they do it for anything else.



I do not share your confidence on this point.


> Not including the Tax Return, you would recommend charging by the minimum:
> Financial Statements Prepared in Accordance with AASB: Accountant's Fees
> + Audit Fees : Unqualified Statement from an Auditor  sits somewhere between $5,000 - $10,000.
> 
> ...



Not quite!

What I would recommend, is that anyone whose trading of Contracts For Difference is sufficiently substantial as to preclude the possibility of making a $250,000 balance election, for one,or more, of their accounts, seek the advice of a competent taxation lawyer.


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## Nemo Data (11 March 2019)

Well cynic, i am not uneducated. I'd stick with the books, you've obviously got a keen interest in the subject matter


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