Reporting: weighted average price source
stimming at tuhh.de
Fri Jul 4 15:48:30 EDT 2008
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
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