commodity income/expense accounts?

[Wm]

Sat, 24 Jan 2015 12:50:31 
<CA+E35_4DHhRN2LNGb9Ze2rm3rgpATVYLXzRODi+XFjCeCNzOFg at mail.gmail.com> 
Edward Doolittle <edward.doolittle at gmail.com>

>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.

Which they can.  I've just given myself a thing (new accounts in Equity 
& Assets) using "XXX (No currency)" in one of my test books [9] and the 
world hasn't crumbled yet.

It is probably an abuse of currency but maybe it would work for some 
temporary purposes.  I can't help thinking that at some point I'm going 
to say to myself, "that thing is worth n" even if n is negative and I'm 
prepared to pay someone to get rid of it.

[9] if you, dear reader, come across this out of context please don't 
try this on real data as I've no idea how it pans out.

> 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.

Here in the UK the municipal value is singularly crap in the Asset 
valuation of a home and involves politics but sensibly you use a better 
example below.

>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.

ROFL  I'm presuming you are familiar with Robertson Davies

> 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.

"Nooooo! It might be a Tretchikoff original" one of the other committee 
members probably said. Wrong kind of indian perhaps? :)

http://en.wikipedia.org/wiki/Vladimir_Tretchikoff

> 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.

Why an Expense?  If you had it from before it should first appear via 
Equity.  The other leg could even be a Liability if it contains 
potentially hazardous stuff in minute quantities which you may have to 
pay to dispose of.  How many old-ish-but-of-no-artistic-merit pictures 
from a few decades ago include lead, for example?

>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.

Indeed.  To throw in something extra what if I have a picture of a 
school friend who is now famous.  Is that a commodity or an asset or 
should I not include it in my accounts at all ? (I choose the last, BTW)

>[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. :-)

Touche, a pleasure conversing with you, E

-- 
Wm...