How do I handle Cash-in-Lieu transactions in the import blotter?
Cash-in-Lieu (of fractional shares) transactions are normally imported as distributions or deposits into Cash. The Cash in Lieu price is usually not provided by the company generating a spin-off, merger, or split. This is because this price is generated by the custodian, and is dependent on when the Cash-in-Lieu transactions are processed. Different Cash-in-Lieu prices often exist for different custodians. Sometimes you will even see different prices used within a custodian, if transactions are processed at different times.
In the import blotter, cash-in-lieu transactions appear separate from spin-off, merger, or split transactions. These items should also be deleted, since the Corporate Action Wizard will account for them.
The easiest way to locate and delete these transactions is to do the following:
Sort the Transactions blotter grid view by either the Ticker or Security ID column.
Scroll to locate the transactions for the new holding.
Review the Comments column for notations referencing Cash in Lieu.
Select and delete these records from the blotter.
The offsetting cash transaction for the distribution is automatically deleted when the distribution is deleted, so it is not necessary to export or delete the cash transactions. If only Cash Deposits were sent as the transactions, they will also need to be deleted.
If no fractional shares resulted from the spin-off, merger, or split, it could be that no Cash-in-Lieu transactions occurred. If fractional shares did result from the spin-off, merger, or split but the custodian is not listing a Cash-in-Lieu transaction, it could be that the transactions have just not yet occurred. These transactions can appear a few days after the initial spin-off, merger, or split transactions.
While working through the wizard, you can enter 0 in the Cash in Lieu Price field and add the price (or amount) later to the generated transactions. You can still post the data even though you may have transactions in your Cash in Lieu blotter which are not ready to be posted.
As long as the Cash-in Lieu transactions have a red triangle in the Status column, they will not post. When you post your data, these transactions will remain in your blotter until the price or amount is entered prior to posting. You can import future dates or import another custodian’s data without losing these transactions. Once you have an amount for these transactions, you can click in the Net Amount field to update the transaction.
If you entered 0 for the Cash in Lieu price in the Corporate Action Wizard, the transactions appear on the Cash in Lieu blotter with a red warning. At this point, you can refer to the Cash in Lieu transactions you exported prior to deleting them to retrieve the Net Amount.
Morningstar recommends updating the Net Amount column rather than the Price column. Why? If the price is added and the calculated Net Amount value (Number of Shares x Price) results in a value with more than two digits after the decimal (18.756 instead of 18.76), this could result in incorrect values in the Cash account.
After entering the net amount in both the Sell and Deposit fields, click Save to have the system complete the transaction.
If you entered an actual price for Cash in Lieu as you completed the Corporate Action Wizard, you need to check each transaction that appears on the Cash in Lieu blotter to make sure no extended values exist beyond the decimal place in the net Amount and Gross Amount fields.
For example, when looking at the Net Amount column, the value may appear to be 18.76, but if you click in the cell it could actually be 18.756. Morningstar recommends updating the value (if more than two digits appear after the decimal) in the Net Amount and Gross Amount columns, and clear the price value. When you save the changes, the price will recalculate.
Once you have verified/updated the transactions in the Cash in Lieu blotter, you need to reconcile. Reconciling will allow you to verify that the Corporate Action was done correctly.
See Also
Determining the Spin-off Cost Basis
FAQs for Spin-off Transactions