Share this content

How to record CFD transactions

Recording CFD transactions in financial accounts

Didn't find your answer?

I have a client which invests in Cash For Difference (CFD) instruments. The company buys stocks but pays a margin of 10%. 90% is borrowed from brokers who charge interest. This is different to options. In the financial statements does one record 100% of the value of stocks as turnover, or just the 10%. If I record 100% turnover would be in hundreds of millions of £ when the company would have expended only 10% to buy stocks.

Replies (18)

Please login or register to join the discussion.

RLI
By lionofludesch
01st Nov 2021 12:22

10% of hundreds of millions is still a lot.

Are you comfortable with this very specialist work ?

Thanks (1)
avatar
By paul.benny
01st Nov 2021 13:16

The initialisation 'CFD' usually refers to contracts for differences (and not as per the OP). CFDs are a derivative instrument that doesn't usually involve buying/selling the underlying shares.

Perhaps your client is dealing with something else.

+1 to lion's comment.

Thanks (1)
Replying to paul.benny:
avatar
By Fatbrain
01st Nov 2021 15:09

In that case, would I be correct is showing only the 10% paid for CFD contract as purchases, and the resultant profit as sales?

Thanks (0)
Replying to Fatbrain:
avatar
By paul.benny
01st Nov 2021 15:22

I think you need to understand the the nature of the contracts entered into by your client. On the evidence of the OP, I don't think you do.

And your response also calls in to question your accounting knowledge. Although I will grant it may be a slip of the keyboard.

Thanks (0)
Replying to paul.benny:
avatar
By Fatbrain
01st Nov 2021 15:28

I fully understand the nature of CFDs. I invest in them myself. I have asked for comments from people who have dealt with recording these transactions.

Thanks (0)
Replying to Fatbrain:
avatar
By paul.benny
01st Nov 2021 16:19

My understanding of CFDs is that the trader does not own the underlying asset. That's significantly different from the OP.

One of us is wrong.

Thanks (0)
avatar
By David Ex
01st Nov 2021 13:50

Fatbrain wrote:

I have a client which invests in Cash For Difference (CFD) instruments.

I might be wrong, but I don't think that CFD stands for "Cash For Difference".

Thanks (0)
Replying to David Ex:
avatar
By Fatbrain
01st Nov 2021 15:10

I stand corrected - contract for difference.

Thanks (0)
avatar
By Leywood
01st Nov 2021 13:58

Contract.

Thanks (0)
avatar
By Leywood
01st Nov 2021 13:58

Contract, not cash

Thanks (0)
avatar
By David Ex
01st Nov 2021 14:45

With numbers of that magnitude, the company may well require an audit so you could ask the auditors.

Thanks (0)
avatar
By Hugo Fair
01st Nov 2021 15:21

As per other respondents, this is a highly specialist area (and way outside my sphere of experience) ... but you mention "90% is borrowed from brokers who charge interest."

So when you ask ".. does one record 100% of the value of stocks as turnover, or just the 10%?" - how are you treating/recording those loans?

Thanks (1)
paddle steamer
By DJKL
01st Nov 2021 16:25

It sounds more akin to margin purchases rather than CFDs (not that I do either, I like to be able to fund any losses from money I hold)

Thanks (0)
avatar
By Tax Dragon
01st Nov 2021 19:43

With clients like that, you must be pretty hot on AML. Do you know - does AML apply only in situations where there is a contractual relationship? And are those situations determinable by reference (and by reference only) to payment of fees?

(I posted a case study for discussion on another thread, but it's been vaporised. And it'd be nice if you provided some answers, as well as expecting others to answer your questions, so I hope you don't mind my piggybacking a bit here.)

Thanks (0)
Replying to Tax Dragon:
avatar
By Hugo Fair
01st Nov 2021 20:17

When? Where? What's been vaporised?
Do you mean https://www.accountingweb.co.uk/any-answers/is-a-company-secretary-deeme... ... or was there a new thread with a case study?

It's bad enough following the mangled 'chains' within some threads (even before they're partially censored), but if they've started disappearing into thin air ...

Thanks (1)
Replying to Hugo Fair:
avatar
By Tax Dragon
01st Nov 2021 22:43

Yes, I replied to your latest on that thread (which is why it was bumped), but my reply has been scrapped by the Siftware. Rather like you, I did wander from my AML brief, but OP's question here has provided a chance to refocus.

Thanks (1)
Replying to Tax Dragon:
avatar
By Hugo Fair
02nd Nov 2021 00:25

My mind boggles (not a pretty sight) in trying to guess what you said in your reply that could have been perceived as transgressing any sensitivities (and whose were deemed to be at risk - certainly not mine)!

Maybe with luck it has only gone into a temporary state of hibernation (one of the dreaded 'pink' flags) ... as I'm honestly interested in the points you've been raising about when AML does or doesn't come into effect (the status of both parties / the relationship between them / the triggers that commence or cease that relationship / the communication channel and medium / use of disclaimers and caveats / etc) - and of course what is meant to happen in public forums like this (or indeed magazine articles) to protect the author from the litigious.

If you've still got a copy of your case study it might be worth posting as a new Any Answers thread? Although, possibly not if it agitates the mods for some reason that you can't work out ... but I really can't see why polite if somewhat inane posts (mine) or occasionally more terse but relevant posts (yours) should be the cause of any problem for readers not actively looking to take offence.

Thanks (2)
Replying to Hugo Fair:
avatar
By Tax Dragon
02nd Nov 2021 00:42

'Case study' was over selling it... maybe it was pulled by some clever trades description software Sift possesses? (Though it doesn't seem to object to and pull the 'site for accountants' misdescription.)

I don't have a copy.

Thanks (1)
Share this content