Saxo supports FIFO and Mark-to-Market valuation.
The FIFO valuation method assumes that the securities that are purchased into a portfolio (or Account) first, are sold out first. Therefore, the costs that are incurred first are recognised first. Let us assume in March there was a purchase of 50 units of stock XYZ at a price of GBP 10 each and commission of 2%. The total cost of the transaction is GBP 500 plus the GBP 10 commission. The costs incurred in Period 1:
In April, a further 10 units of stock XYZ are purchased at a price of GBP 20 and a commission of 2%. The total cost of the transaction is GBP 200 plus the GBP 4 commission. The costs incurred in Period 2:
At the end of November, 55 units of XYZ are sold at a price of GBP 15, the closing Transaction Value is determined first so as to calculate Realised P/L. And according to the assumptions of FIFO the units that were purchased first are sold off first. Therefore, the costs that were incurred first are recognised first in determining the Realised Position P/L. The total cost of the transaction is GBP 825 plus the GBP 16.50 commission. The income gained in Period 3:
The closed position is of 55 units, but only 50 units were bought in Period 1. To determine P/L using FIFO, the cost of the first 50 units of the closing position are recognised first:
The costs from Period 2 are recognised after all the costs from Period 1 have all been taken into account.
The Total Realised Position P/L is calculated as:
How to determine PnL for tax reporting
The Closed Position report gives an indication of the performance of a portfolio ( or Account) within a specific valuation period. Please note that the report calculates profit/loss based on FIFO principles, which might not be the principle used by your local tax authorities. The report should only serve as an indication of profit/loss in the period. Always reference the profit/loss calculation against the underlying trades found in the trades report.