Using multiple currencies

[John Ralls]

> On May 7, 2016, at 7:52 AM, Mike or Penny Novack <mpnovack at mtdata.com> wrote:
> 
> On 5/6/2016 5:18 PM, John Ralls wrote:
>> On May 6, 2016, at 1:05 PM, Ruth Morley <morley.ruth at gmail.com> wrote:
>> 
>> Newbie - I have built a chart of accounts for here in the US and included
>> assets and expenses in France. When I enter my transactions against my
>> French bank it asks for an exchange rate and enters them in USD. I have
>> described this as a euro account and want to keep it in euros. Can I do
>> that? How?
>> To avoid exchange rates both split accounts must be in the same currency, so you need to have a set of expense accounts denominated in EUR and be sure to use those accounts for transactions with your EUR asset accounts.
>> 
>> Regards,
>> John Ralls
>> 
> Something we haven't been discussing is the PURPOSE of having different currencies, in other words, how that fits into one's economic life. Because THAT might be a major factor in deciding the best way to proceed.
> 
> Much of the advice so far has been for the situation where one is primarily focused on one currency or transfers between the currencies frequent. But there is another possible situation, where economic life in one currency fairly distinct from the other and transfers between them rare. For example, people who part of the year live in one place and part of the year in another and transfers of funds fairly rare and might be timed to take place when exchange rates are favorable (rather than when expenses incurred, assuming of course, that current assets in each place sufficient to allow that).
> 
> In a situation like that might want to consider separate books. It is, after all, not a big deal to at any time figure net worth from a balance sheet for both (and applying the exchange rate) and can be done in EITHER direction. Note also that the rules of the two jurisdictions might well also be a factor in making the decision, all in one set of books or two << for example, if neither jurisdiction requires disclosure of "foreign holdings" you probably want separate books ---- that consideration might even apply to situations when all in a single currency >>

That's a workable option if one's financial affairs are really that isolated, but it seems an unlikely scenario. Even if one has arranged life so that one has completely separate asset accounts fed by separate income streams that are separately taxed one is likely to want to have an aggregate income statement with both halves reduced to a single currency.

Of course for all of those people recently featured in the "Panama Papers" it probably is preferable to have separate files. On separate computers in places that can only be raided by the tax authorities of the country for which that particular set of accounts applies. ;-)

Regards,
John Ralls