commodity income/expense accounts?

[Edward Doolittle]

On 24 January 2015 at 06:00, Wm <wm+gnc at tarrcity.demon.co.uk> wrote:

> Thu, 22 Jan 2015 16:11:35 <CA+E35_5BEZLQ5FYF8QaDFd9jHNB5J7y4jUMV
> LggHyKhCOtPrHA at mail.gmail.com> Edward Doolittle <
> edward.doolittle at gmail.com>
>
>>
>>  The better way is to hold the house as a
>> commodity and to use trading accounts to keep track of the unrealized gain
>> or loss, which would simply become a realized gain or loss when the
>> property is sold.
>>
>
> Umm, if the house is an Asset and the amounts recording the change in
> value are recorded in a Trading account (which is Equity) doesn't that
> solve the thought problem?  You have an Asset, you record the change in
> value through variations in Equity conveniently (or otherwise) called
> Trading accounts [2]
>

I guess I have been unclear, but the point of my ramble is exactly what you
say: It is helpful to record the change in value of non-default-currency
assets (e.g., equities, currency in denominations other than your default
currency, and even houses) in a trading account. Which, as far as I can
tell, requires that asset accounts should be able to hold non-currency
assets like houses.

 So I would be in favour of allowing non-currency
>> commodities for asset accounts other than stock and mutual fund accounts.
>>
>
> Where would you value them in real world terms ?
>
> I'm not sure a house is a good example, BTW, as there aren't any
> international exchanges for them, or at least, there isn't one for my home
> :)
>

Even calling a single house a "commodity" doesn't seem right, as there is
no continuous market for (most) houses, and most houses are unique and not
simply interchangeable with other houses. However, pricing can be
accomplished by whatever means are acceptable in the context of local laws
and the purpose for which the books are maintained. In some cases a formal
appraisal may be required, while in others an estimate based on changes in
value for surrounding properties, or the municipality's estimate of the
value of a property, may be adequate.

I have been involved with a few formal professional appraisals of art work
for tax donation purposes. Our art collection committee has also had to
decide on the "deaccession" (art talk for "chucking in the garbage",
roughly speaking) of some rubbish that crept into our collection over the
years. I doubt it would even be possible to get a formal appraisal of a
mass-produced "Indian Princess" style mirror frame on which the princess's
dress inexplicably manages not to completely cover her backside, for
example. One approach to the issue of valuing "commodities" could be that
if a formal appraisal/market valuation of an item is possible, we could
consider it an asset; otherwise it is an expense.

I am getting far, far from my comfort zone in terms of expertise, but I do
feel comfortable summarizing as follows: there are potential advantages to
using non-currency, non-equity "commodities" such as houses and art items
in asset accounts. The complexities of doing so should not be
under-estimated, but managing those complexities in the context of local
tax laws and other regulations should be the responsibility of the user.

[1] obs curious: is that perceived as offensive in any form either by
> yourself or if not by you then generally, Edward ?  Is it just a tired joke
> people (not me) presume you'll use and you play along ?


Not at all, we joke in that manner all the time. Certainly, it was a better
joke than your date format joke. :-)

E

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-- 
Edward Doolittle
Associate Professor of Mathematics
First Nations University of Canada
1 First Nations Way, Regina SK S4S 7K2

« Toutes les fois que je donne une place vacante, je fais cent mécontents
et un ingrat. »
-- Louis XIV, dans Voltaire, Le Siècle de Louis XIV, Chap. XXVI