About Same Lot Selection Processing
When you use same lot selection, despite the difference in cost and lot structure, the system relieves the “same” lots across all bases on an entity. The
end result is that the remaining lots in each basis originate from the same lots even though the structure (due to wash sales) and cost may
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How Same Lot Selection Affects Close Transactions for Trades
When you use same lot selection, the system uses lot selection logic designed to relieve the "same" lots across all bases of an entity, such that the remaining lots in each basis originate from the same lots even through the structure and cost maydiffer. The system can link fractured lots caused by wash sales in a tax basis back to a single lot in another basis and
consider it the same lot for lot selection and reconciliation.
To use same lot selection, you
identify an accounting basis within an entity as the controlling basis to use for lot selection. During
processing for a close transaction, when the system executes a trade on both bases, it first creates close transactions for the controlling basis. Then, when it is replicating the transactions for the non-controlling bases, it uses the lot selection results of the controlling basis to perform lot selection for the non-controlling basis or bases. It closes out the same lots in the non-controlling
bases that were closed in the controlling basis.
Same lot selection uses the Original Event ID (tag 457) as a common lot identifier on transactions and as the common link across lots for multiple accounting bases. This identifier indicates that a lot in a position on one basis is the same lot on another basis. Due to fractured lots caused by wash sales, multiple lots on one basis can correspond to a single lot on another basis. This Original Event ID tag has the same value on the fractured lot and its sub-lots in the case of wash sales.
During same lot selection processing,
the system considers whether each controlling and non-controlling basis
How Same Lot Selection Affects Other Close Transactions
Same lot selection applies to various types of close transactions such as those related to corporate actions and interportfolio transfersuses wash sales processing in order to keep the lot structures in sync.
Same lot selection also applies to other types of close transactions. The system references the Orig Event ID (tag 457) from the open lot on close lots for all transaction types that affect a cost position. This allows the system to maintain the same lot structure across bases
for these
transactions.
About Global Processes and Same Lot Selection
If
you use same lot selection, certain global processes related to fixed income securities use the controlling basis during processing to keep lots in sync across bases. Global processes such as the accruals process and variation margin identify the controlling basis in order to replicate events from the controlling basis. The system does this when you run the global process panel manually or automatically,
as well as when the system triggers the global events in rollback/replay when it is processing an event on an As Of basis.
About Pending Transactions and Same Lot Selection
When you use pending transactions and alsoWhen the system performs rollback and replay for entities that use same lot selection, if the system
backdates any activity, the controlling basis
position rolls back the cost, and propagates the replay information of any sells to loopbacks for the non-controlling basis. If there
are changes to a security or amortization rule, for example, the system can roll back and replay sell transactions for multiple bases, and create sell transactions in a manner that maintains lots structures consistent with same lot selection processing.
About Reconciliation and Same Lot Selection
If you use same lot selection and
use Eagle solutions for reconciliation, STAR to PACE Direct sends the Original Event ID to the Eagle data warehouse tables for use in reconciliation when comparing lots. You can set up the reconciliation process to identify expected accounting differences and to assign reason codes that inform you why lots are out of sync. For example, if you have known amortization
method differences between bases that
you expect to cause a break each day, you can set up rules to evaluate the difference to see if it
meets certain conditions. If conditions are met, the system can flag the amortization difference as an expected or known difference and assign it a specific reason code.
About Standard Reports and Same Lot Selection
Same lot selection does not require any special setup for reports in Eagle Accounting's standard report package.
However, if you use same lot selection and you run the Hypothetical Sell Query report, be sure to run the report only for the entity's controlling basis.