[GNC-dev] reconciliation concept from top view

[Dale Phurrough]

Thanks for your perspective on that example, Christopher. I remind everyone
my "top view" message is written at a high-level with high-level
generalized concepts. The examples are not written as real-world workflows
that apply any specific country's financial laws or accounting regulations.

Christopher, your implicit inquiries are valid. You are somewhat
investigating the attributes/methods of a statement of facts and of a
shared truth. These are very valid inquires...though lower level than the
conversation I'm encouraging at this time. I don't want to shut down
discussion, so I'll dive down into some details on two of your implicit
inquiries for a moment.

1. Can a statement of facts be invalidated?
Yes. And this highlights the concept of "fact". A true fact is
something known in a specific moment now or in the past. Time moves forward
and, at a different moment in time, a fact can be different. Therefore a
statement of facts can be correct today and incorrect tomorrow.

Real world: In the USA, the IRS can independently investigate and
recalculate taxes and issue a statement of facts to a taxpayer. Conversely,
a taxpayer can recalculate their taxes with form 1040X and issue an updated
statement of facts to the IRS. The process that happens next is an
abbreviated or highly detailed reconciliation process. I had a level 2
audit by the IRS many years ago. The auditor and I sat in a dimly lit room
for two days doing a reconciliation process. The IRS compared transactions,
receipts, sums, and statements of facts. In the end, we disagreed on $3.12
which was de minimis...the reconciliation was successful. Another example,
US Bank reissued bank statements to me due to "clerical" and "computer"
errors. USAA Bank has done similar. In Germany, German FinAmt (German tax
authority) has a Bescheid process where each side repeatedly invalidates
old statements of facts and issues new ones. And Deutsche Bank has reissued
a monthly statement to me -- the individual transactions were the same, but
they instead reissued a month as two separate statements of 7 days then 23
days -- each with their own "final balance".

Creating a shared truth based on statements of facts is also between two
people. It is not always one person + one financial entity. For example, it
could be me with GnuCash + independent auditor. During an audit, errors are
made/found on both the auditor and auditee until finally both sides create
a shared truth together. No fraud during the reissue(s) of statements of
facts. Instead, it is the healthy working of a reconciliation process to
surface these errors. Or like Derek's example, it could be between Derek
and his employer's expense department.

2. Can shared truths be altered?
You inquiry also hints at something I also hint at in my pseudocode. My
instinct tells me that shared truths can *not* be altered. Instead they are
timestamped, signed, and sealed. So if a statement of facts is
reissued...which proves a past shared truth to be false...then a new shared
truth must be created. The old shared truth continues to exist but is now
false/invalid. This idea of shared truths transitioning from true to false
is evident throughout human history. For example, in the past it was a
shared truth that the world was flat. We had facts that established it.
However, one day the ancient greeks experimented and proved the earth was
round. And it took many hundreds of years for human civilization's shared
truth to change from "flat" to "round". The old shared truth of flat
doesn't disappear. Instead, it is now known to be false/invalid and is
archived in our history books. It is superseded with a new shared truth of
"round".

--Dale

On Thu, Apr 16, 2020 at 3:48 AM Christopher Lam <christopher.lck at gmail.com>
wrote:

>
>
> On Thu, 16 Apr 2020, 2:57 am Dale Phurrough via gnucash-devel, <
> gnucash-devel at gnucash.org> wrote:
>
>> Accounting example:
>> On 1 April 2020 the bank and I believe it is the truth that my bank
>> account
>> contains $1000. Two days later, I discovered that an additional deposit of
>> $500 should have been posted to my account. The bank found their error,
>> reissued a statement, and I updated my ledger. Now the bank and I agree
>> the truth is my bank account contained $1500 on 1 April 2020.
>>
>
> I do not think a bank is ever allowed to amend a statement like this. It's
> financial fraud. At most, they may issue a new transaction on the day of
> the correction, and offer an adjustment for fees, interest etc also dated
> on the day of the correction.
>
>
>
>>