Unrealized gains: conclusions?

[Charles Day]

On Sun, Jul 6, 2008 at 2:33 PM, Charles Day <cedayiv at gmail.com> wrote:

> Now that we have all had a chance to chew on the recent unrealized gains
> discussions, I wonder if we might be able to come to some conclusions. Here
> is my list for your comments and/or additions.
>
> 1. During reporting, translation into the reporting currency can introduce
> unrealized gains. The GnuCash reporting system is intended to automatically
> calculate and report these gains.
>
> 2. Several fundamental GnuCash reports do not calculate unrealized gains
> correctly. For example:
> -Balance sheet: correctly figures unrealized gains on assets, but doesn't
> do the same for liabilities
> -Trial Balance: incorrectly figures unrealized gains (I don't quite
> understand why unrealized gains and a choice of "price source" are desirable
> for this report anyway.)
> -Equity Statement: incorrectly figures unrealized gains, and also does not
> figure unrealized gains at period start
>

I've fixed the balance sheet problem as of r17287. So that one should be
completely working.

3. GnuCash does not force the user to record realized gains.
>
> 4. Without trading accounts, if the user forgets to record realized gains
> then they will either:
>  (a) be mixed in with unrealized gains on reports, or
>  (b) put the books out of balance. (This only happens when all holdings of
> the commodity whose sale created realized gains have been sold.)
>
> 5. With trading accounts (as defined by Peter Selinger), if the user
> forgets to record realized gains then they will become mixed in with
> unrealized gains. However, the books will not fall out of balance.
>
> 6. With trading accounts, reports have no need to calculate unrealized
> gains.
>
> 7. Using trading accounts allows unrealized gains to be categorized by
> source. Reports currently only show all unrealized gains as a lump sum.
>
> 8. Trading accounts should use account type Equity, not Income. (I'm
> changing my mind and now agree with Derek.) This is because unrealized gains
> should not be included in Retained Earnings in the balance sheet, but rather
> displayed as a separate line in the Equity section. This may be a personal
> choice thing though... if you really consider unrealized gains to be current
> income then there is nothing to stop you from using an Income account
> instead. The math is the same, so the choice only really only determines how
> unrealized gains get reported.
>

And the two new ones, which with adjustments have now become three...

9. Entering unrealized gains is optional and must remain so.

10. Use of trading accounts is compatible with the practice of not entering
unrealized gains. In any case, use of trading accounts is optional.

11. Revaluation of commodity holdings in reports and in the GUI should be
optional.
An update: Yesterday I added an "Average Cost" price source that can be used
to avoid revaluation in reports.


> -Charles
>