SPINOFF: DE Master Blenders from Sara Lee

Issue: How do I enter the spinoff of DE Master Blenders from Sara Lee?

Cause: Sara split the company into Sara Lee and DE Master Blenders. Sara Lee is considered the parent company. A reverse split and name change occurred to change Sara Lee into Hillshire Brands. DE Master Blenders also had a change of domicile to the Netherlands. The change of domicile was a taxable event. If the fair market value (FMV) of DE Master Blenders was greater than a shareholder’s cost basis at the time of the domicile change, the difference is a capital gain. The cost basis for the future would be adjusted to the FMV at the time of the domicile change.

The cost basis allocation information can be found on the Hillshire Brands web site at:

http://investors.hillshirebrands.com/phoenix.zhtml?c=70115&p=irol-irhome. Click the link for Tax Basis Methodology on the page.

Resolution:

This action will need multiple entries in the accounting software. The information below is based on the information available from Hillshire Brands in the document referenced above.

The Spinoff Entry

Go to Transactions > Spinoff or Accounting > Securities > Record spinoff of securities depending on the version of the software being used. If you are unfamiliar with spinoff transactions you can get help at this URL: http://www.iclub.com/support/kb/default.asp?page=normal_spinoff

Here is the information you need to complete the spinoff.

Date: 6/28/2012

Select Parent Security (or Parent Company) : Sara Lee (SLE)

Remaining Basis Percentage: 30.81

Cash received: See your broker statement for cash-in-lieu received

Spinoff Security (or Symbol of New Company) : DE Master Blenders (DE.AS)

Shares received : 1 x (#of SLE shares owned) (Remember to include fractional shares.)

For example, if you owned 100 SLE shares, you should receive 1 x 100 = 100 DE.AS shares.

Price Per Share : 10.38 ( 8.44 Euros converted to dollars at exchange rate on 6/28/2012)

Save the transaction and the spinoff has been entered.

The Reverse Split Entry

Go to Transactions > Spinoff or Accounting > Securities > Record spinoff of securities depending on the version of the software being used. If you are unfamiliar with spinoff transactions you can get help at this url: http://www.iclub.com/support/kb/default.asp?page=normal_split

Here is the information you need to complete the reverse split.

Date: 6/29/2012

Security : Sara Lee (SLE)

Split Ratio : 1 for 5

Cash for Fractional Share : See your broker statement. Do not confuse the amount with the cash received for fractional shares in the spinoff described above.

Save the transaction and the reverse split has been entered.

The Name Change

For Club Accounting 3 do the following:

Click Securities. Double click on Sara Lee

Change Security Name to Hillshire Brands.

Change Ticker Symbol to HSH

Click OK button.

For Online Club Accounting do the following:

Click Securities. Click the Update Security settings link.

Click Edit next to Sara Lee .

Change Company Name to Hillshire Brands.

Change Symbol to HSH.

Click Submit button.

The Domicile Change for DE Master Blenders

You must declare a capital gain if your FMV of the shares of DE Master Blenders (DE.AS) at the time of the domicile change is greater than the cost basis of the shares. Determine the FMV by multiplying the total shares of DE Master Blenders by 10.38. For example, if you received 100 shares of DE.AS the FMV value of your shares would be 100 x 10.38 = 1038. Compare this to the cost basis of the DE.AS shares on the Security Transaction History report. The total cost basis of all shares is listed in the last column, Total Cost.

Capital Gain = FMV – Total Cost.

If this is not a positive number you can stop here. You have no gain to report

If this is a positive number enter the result as a capital gain distribution from DE.AS.

Go to Transactions > Dividend or distribution in Club Accounting 3 or Accounting > Securities > Record cash dividend in the online Club Accounting.

Security: DE Master Blenders (DE.AS)

Date: 6/29/2012

Amount: Gain calculated from above

Type: Long-term or Short term capital gain distribution depending on how long you held SLE

shares.

Ex-Dividend date: When you choose capital gain distribution this field is immaterial. It should

grey-out and you should not be able to enter anything in the field.

Save the transaction to account for the gain from the domicile change. The capital gain distribution will increase your cash balance. You now need to balance your cash account.

Balance the Cash Account and Adjust DE.AS Cost Basis

Go to Transactions > Dividend or distribution in Club Accounting 3 or Accounting > Securities > Record cash dividend in the online Club Accounting.

Security: DE Master Blenders (DE.AS)

Date: 6/30/2012

Amount: - Gain calculated from above (a negative number.)

Type: Return of capital

Save the transaction. This will balance the cash and adjust the cost basis of the DE.AS shares.

NOTE: The price of DE.AS is quoted in Euros. Entering valuations will likely require converting the price from euros into dollars and manually entering the price. Use the exchange rate on the valuation date. Historical exchange rates are available online.