Investment Portfolios

December 2022

Investment portfolios have become a little more common as interest rates tumbled even before the COVID crisis, and there was no money to be made with term deposits. The accounting treatment of such portfolios is not particularly straightforward and trips many people up.

We generally have to distinguish between realised and unrealised gain in those portfolios. They generally have a mix of investment types, some of which offer a return that is paid out (interest or dividends, a realised gain) while for others the gain is only on paper until the investment is sold (unrealised). The investment company will also charge fees, which are taken from realised gains. Any realised gains over and above fees will be re-invested by the portfolio manager, or if there aren’t enough to cover the fees, they will sell some of the investments. This hides those transactions from view, but it is nevertheless real money, and needs to go into your cash or accrual-based income/expenditure report. For the unrealised stuff you generally have a choice: you can put it into your report at market valuation (which is what we at CCA usually do unless instructed otherwise), or you can carry it forward at the amount you originally paid for it.