Reporting: weighted average price source

[Christian Stimming]

Am Freitag, 4. Juli 2008 20:30 schrieb Charles Day:
> On Fri, Jul 4, 2008 at 2:58 AM, Christian Stimming <stimming at tuhh.de> wrote:
> > Am Freitag, 4. Juli 2008 04:31 schrieb Charles Day:
> > > For reports, does anyone know why the calculation for price source
> > > "weighted average" uses the absolute value in its calculations? It
> > > seems to me that this gives incorrect results.
> >
> > If I recall correctly, this code comes from the old days when I added
> > this to
> > track "my personal exchange rate" between USD and EUR. Without this code,
> > I think if I bought x USD for y EUR and later sold x USD for y EUR, the
> > resulting rate turned out zero instead of the expected value (which is x
> > divided by y). Using absolute values here gave the intended results.
>
> Ah, I see... so is the "weighted average" price source defined as "weighted
> average price experienced during buys and sells, not including transaction
> fees such as commission"? Because if so, then do you think that exchanges
> with a zero "amount", such as capital gains and losses, should be excluded?

Indeed I introduced this option only with contexts in mind where there were no 
capital loss transactions are included. I have no idea how this has been used 
since then, or how other people have used it.

> Example: Buy 5 USD for 4 EUR (exchange rate = 0.8), then sell 5 USD for 3
> EUR (exchange rate = 0.6), giving a 1 EUR capital loss. I am guessing from
> your response that would expect to see the weighted average price of the
> buy and the sell alone, which is (4 + 3) / (5 + 5) = 0.7. 

Exactly. That was what I intended when I introduced that option back in 2001. 
I didn't actually record any capital loss transactions.

> However, the 
> current formula includes the capital loss in the calculation: (4 + 3 + 1) /
> (5 + 5 + 0) = 0.8.  Of course, this assumes that you actually record the
> capital loss. (GnuCash doesn't require you to, but failing to record the
> loss puts the books out of balance.)
>
> Now on the other hand, what I am proposing is to get rid of the absolute
> value but keep the zero "amount" exchanges. That would change the
> definition to "weighted average cost for shares currently held, not
> including transaction fees such as commission".  A few users have been
> asking for this option, which I maybe could add.

This option seems to make a lot of sense, too, but it will show different 
numbers. Hence I'm not sure whether a complete replacement of the existing 
option is the best idea, and maybe a new option is the better way to go. 
(Although adding yet another option is always the sub-optimum result of a 
discussion...)

Christian