[GNC] Cashflow-like report to show realized and unrealiz

Wed Feb 27 11:39:00 EST 2019

David wrote
> IANAA, but as I understand it, gnucash doesn't track unrealized gains well
> mostly because traditional accounting isn't focused on unrealized gains.
> I'm told that accountants want to be certain that the *amount* of what you
> have is accurate. The value of that is less interesting.

GAAP care very intensely about valuing assets and unrealized gains.  For
financial assets, with very limited exceptions, mark to market is the law of
the land.  No CPA will attest financial statements that don't fair-value
financial assets.

David wrote
> Honestly, the deeper you dig in that hole, the crazier it seems to get.
> Value as determined by whom? At what time? In what jurisdiction? In which
> currency? At what exchange rate? All of these will affect a valuation that
> ultimately is a fantasy. Just ask any art collector...

Awwww yeah, get you some  FAS 157 <https://www.fasb.org/pdf/aop_FAS157.pdf>  
boyee!!

FASB in fact prescribes a fair-value hierarchy classifying the degree of
sketchiness of your valuations.

You want crazy?  How about those investment banks booking unrealized gains
during the 2008 financial crisis because their outstanding bonds were
plummeting in price... solid Level 1 valuations!! ... and FAS 157 let them
elect to fair-value their *liabilities*, not just their assets.

The rabbit hole can indeed get pretty deep down there at Level 3, but OP is
asking about plain vanilla Level 1 assets (currency & marketable
securities).

David wrote
> None of it is real until someone pays for it-- and then you have a
> transaction to record it.

You are describing the perspective of cash-basis accounting, which is what
we use GnuCash for ... it's useful for things like budgeting & taxes.

GAAP is accrual accounting, and a foundational principle is that the
earnings process is divorced from cash flows.  Noncash transactions tend to
occupy a big chunk of the ledger.  If you want your balance sheet to present
assets at fair value rather than historical cost, you need unrealized gains
to make your income statement tie out to the balance sheet as it rolls
forward.

What this looks like is that, on your chart of accounts, a financial asset
has subaccounts for cost basis and unrealized gain/loss.  There's an
unrealized gain/loss account under income, too, along with a realized
gain/loss account.  When you fair-value an asset, the transaction is split
between the asset subaccount and the income subaccount.  When you close out
a financial asset, you Dr/Cr the unrealized gain/loss account on the income
statement against the realized gain/loss account.  This is in the addition
to splits wiping out the asset subaccounts against
cash/equivalents/receivables.

What OP is running into is a design limitation of GnuCash - it only handles
a single accounting basis, and it is geared toward cash basis, so it's good
for analysis of those types of problem (cash flow, realized gains, etc.)

A long time ago I tried setting up GAAP chart of accounts for securities in
GnuCash, and it was super annoying to work with b/c the lack of automation.

In actual accounting practice, people who need GAAP financial statements
(e.g. anybody who's accounting for investments) set up a chart of accounts
geared toward GAAP, and keep the ledger on that basis.  Then they push a
series of adjusting transactions to transform to tax basis, and another
series of adjusting transactions to transform to statement of cash flows.

Financial software packages tend to implement this functionality in reports
by flagging certain categories of income-statement accounts as with "ignore
this for taxable income".  It gets more complicated for cash flow.

I'm not an accountant, either, but I do have to deal with this stuff, and
no, GnuCash doesn't implement the needed functionality.  It's a fairly
glaring omission if you care about investments, but the amount of work
needed to relax this constraint would be pretty significant, and I don't
think most people care enough to make it happen.  I mean, hell, I've written
my own library to calculate capital gains, and I haven't yet cared enough to
make that happen, either.  You get in hot water with the tax authorities if
your cash-basis accounting isn't just right, but unless you have financial
reporting obligations, the same is not true of GAAP accounting.... so we all
tend to concentrate development effort on cash basis, and end up using
brokerage statements and spreadsheets or scripts for tracking personal
investments.

  On Wed, Feb 27, 2019 at 15:50, Chary Chary<chary314@> wrote:  
Christopher-

thanks.

But I must say, I still have a sneaky feeling, that I may be missing
something, because I just don't understand how people who deal with several
currencies and who have stock can possibly live without such report, which
would show unrealized gains.

Without report with unrealized gains you have a situation, that you have
some balance at the beginning, balance at the end, but you have no report,
which would show how you got from balance at the beginning to balance at
the end. Even though all your individual transactions are balanced, if you
add them all together they will not produce a delta between balance sheets,
in case you deal with  more then one currency or have stock / gold
(anything).

In a very simple situation:

Say I want to report in EUR, but I keep money in USD. Say I have 1000 USD
and exchange rate was 1:1 at the beginning.
So, starting balance sheet will say, that I have 1000 EUR
Then exchange rate changed and now 1 USD costs 2 EUR. So, all of a sudden
balance sheet at the closing will show, that I now have 2000 EUR.
But how did happen?
I would then expect some line, saying something like: "unrealized gain due
to USD/EUR" exchange rate changes"  - 1000 EURO.

The same applies to stock changes.

Am I talking some nonsense? How do people manage their finance without such
analysis in our modern world?

On Tue, Feb 26, 2019 at 1:49 PM Christopher Lam <christopher.lck@>
wrote:

> Unfortunately there is *no* income statement type report which will
> calculate unrealized gains for you.
> Your best bet is to reevaluate periodically using the usual balance sheet.
>
> On Tue, 26 Feb 2019 at 06:28, Chary Chary <chary314@> wrote:
>
>> Hi everyone,
>>
>> thank you for help, but I just can't make it work.
>>
>> I try a very simple setup:
>>
>> Main currency - Euro
>>
>> 1000 USD are moved to checking Account at the beginning of the period.
>>
>> Exchange rate at the beginning - 1 USD costs 1 Euro
>>
>> Middle of the year it changes - 1 USD costs 2 Euro
>>
>> No transactions
>>
>> Net Worth Barchart  correctly shows increase is Net Worth throughout
>> the year. However Income statement report does not show any traces on why
>> net wort has increased now.
>>
>> Based on my understanding of the Tutorial on multiple currency accounting
>> (
>> https://www.mathstat.dal.ca/~selinger/accounting/tutorial.html ) I would
>> expect, that the statement would include line:
>>
>> Unrealized gain due to USD/Euro exchange rate  - 1000 Euro  or something
>> similar
>>
>>
>> Any ideas on how to achieve this with Gnucash?
>>
>> For illustration I have created simple document with screenshots as well
>> my
>> test file
>>
>> https://drive.google.com/open?id=1T3KEhAOkkytyW1Dne0vVs259cv0WxtfK
>>
>>
>>
>>
>>
>> On Mon, Feb 25, 2019 at 1:02 AM Chary Chary <chary314@> wrote:
>>
>> > Hello everybody,
>> >
>> > I just started learning gnucash with the goal to depart from my from my
>> > Excel-based bookkeeping system with pivot tables, so forgive me if I
>> ask
>> > stupid question. i think I read pretty much all of the help file, but
>> still
>> > didn't understand whether the following is possible:
>> >
>> > I am just wondering  whether there is a cashflow-like report which
>> shows
>> > also realized and unrealized gains for certain period
>> >
>> > What exactly I mean by this:
>> >
>> > Say at the beginning of the year I have produced a Balance Sheet
>> report.
>> > This report shows how much assets I have, which liabilities and delta
>> > between them. Suppose at begging of the year I had checking accounts in
>> USD
>> > and Euro and some stock.
>> > Throughout the year I was getting salary, paying expenses, at the same
>> > time exchange rate was changing, stock price was changing etc. My be I
>> sold
>> > some stock, moved money between USD and Euro accounts
>> >
>> > Now at the end of the year I have produced a new balance sheet.
>> >
>> > So, I want to be able to explain a delta between a balance sheet at the
>> > beginning of the ear and at the end.
>> >
>> > E.g.:
>> >
>> > I got so much salary
>> > I paid so much costs
>> >
>> > But also:
>> > Lost so much due to exchange rate change
>> > Gained to much due to stock price increase etc.
>> >
>> > So, effectively I need to be able to drill down in the delta in Balance
>> > Sheet report
>> >
>> > Regards.
>> > Chary
>> >
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