Company no longer trading

[OnYourOwn]

How do I account for an issue that is no longer trading, i.e., bankrupt. I tried to give stock a zero value, but that is not allowed.

[Mark]

Hi OnYourOwn,

Fund Manager has a limitation that you cannot record a closing price of 0. You have a couple of choices...

1) Sell your shares, for $0. You can record a buy/sell for any amount, including $0.

2) Record the closing price for $0.000001

[mfmelb]

Hi Mark,

This question is similar.

If a business/property is writen down, say by 20%, how do you go about recording it so that the reports will show the performance, TWR correctly?

Have initially setup the investment with a $1 per share. As there is no daily pricing but an annual valuation, I have just use unit pricing of $1 until the re-valuation date. If the valuation is up, I just add more shares at $1 each. But if it is valued down, I have so far use a sell the amount of shares equivalent to the amount devalued but at $0. I am not sure whether this will cause a problem in the performance or TWR calculations. I know for sure that if I were to totally write-off the investment by selling all the shares at $0, the report will show some really weird results - esp. in TWR.

Matt

[Mark]

Hi Matt,

For this case, since the valuation change is not due to you buying/selling more shares, you should use a reinvested distribution to reflect the change in value. For example, if it was worth $10,000 you own 10,000 shares, at a price of $1. Now, if at some point in time you know the value is $9,000, record a reinvested distribution for an amount of -$1,000 and -1,000 shares, and a price of $1. After this, you own 9,000 shares at a price of $1, and you didn't sell or buy anything. The change was due to a negative distribution.