Corporate action entitlement calculation is the step in corporate action processing in which a custodian, broker or fund administrator works out exactly what each account is due from an event. The starting point is the eligible position: the holding on the record date, adjusted for trades that were dealt with the entitlement but had not yet settled, and for securities out on loan or held as collateral. That position is multiplied by the event's rate or entitlement ratio to give a gross amount of cash or new securities.
The gross figure is then adjusted. Withholding tax is deducted at the rate that applies to each beneficial owner, currency conversion is applied where the holder is paid in another currency, and any fractional entitlement is rounded or replaced by a cash-in-lieu payment under the event terms. Results are checked against the amounts advised by the depository or agent before accounts are credited on the payment date.