[GNC] Balance sheet unusable for LANG="de..."; was: Bad account setup in Guide §12

[David Cousens]

Frank,

It is not clear to me,the extent to which the gains and losses claculated are realized or unrealized. For example if I
transfer $1000 AUD to USD at one exchange rate and then transfer $300 USD of it back at a different exchange rate the
AUD trading account records the difference between the amount traded in the first transaction and the amount received
back in the second. What is reported as a Trading Loss in the balance sheet, appears to be the difference between the
AUD and USD trading accounts, from a a couple of simple experiments in this case. It is not until the whole amount
initially transferred is transferred back that the balance represents an actual realized gain or loss.  In this case one
could have an unrealized gain or loss on the amount that is still held in the foreign currency account and a realized
gain or loss on the amount which has been transferred back.  I have not done enough experimentation at this stage
(and/or looked at the Scheme code) to understand fully what is happening and what is being reported where under what
circumstances. 

I think I need to document that first and develop test cases where I can manually calculate the gains and
losses both unrealized and realized to establish how they are actually being treated with the trading accounts in each
case before raising any alarms with the rest of the developers unnecessarily. Once that is known then if I can determine
under what circumstances realized gains and losses are reported in profit and loss and when in equity and when and where
unrealized gains and losses are also reported. 

At that point I can look at the reporting requirements in a few major
jurisdictions. Then I can make a decent case to the rest of the developers as to what needs to be done if anything-
possibly some general reporting options that a user can set to direct the realized and unrealized gains appropriately
for a given jurisdiction. It may be posssible that this has been examined already but it won't hurt to have a check on
it anyway and doing this will allow me to create documentation on the trading accounts.

This doesn't affect where
realized and unrealized gains and losses are reported if you are doing manual calculations of them. Whether you position
the relevant accounts under income and/or expense or in equity should determine where they are reported, at least in
principle. I remember  some discussion in the past as to how tostructure the report when you had both manually calculate
gains and losses for some situations and also had trading losses on forex transactions.

Hopefully this is not a goose chase and opening the can of worms will catch some fish.

Cheers

David


On Fri, 2020-04-17 at 16:26 +0200, Frank H. Ellenberger wrote:
> David
> 
> Am 17.04.20 um 13:00 schrieb David Cousens:
> > Frank 
> > 
> > In that case you should be concerned as the trading account balances are
> > currently reported under equity in the Balance sheet.
> > 
> > The attached is a Balance sheet run on a dummy book I created
> > Trading_Test_BalSheet.png
> > <http://gnucash.1415818.n4.nabble.com/file/t375329/Trading_Test_BalSheet.png>  
> 
> Oh, that makes the balance sheet useless for german and probably other
> users. Unrealized gains/losses do not belong in the balance. The user
> has to manually enter value adjustments in the closing book process
> according local law to reflect them, if applicable.
> 
> That was also the reason, why the trading accounts were not implemented
> over a decade.
> 
> > The dummy book is attached as well
> > Test_trading.gnucash
> > <http://gnucash.1415818.n4.nabble.com/file/t375329/Test_trading.gnucash>  
> > 
> > The amount shown under Equity as trading losses is the sum of the balances
> > of the trading accounts in AUD and USD expressed as AUD after a couple of
> > dummy transfers from AUD->USD->AUD and USD_>AUD->USD with changes in the
> > exchange rate between them. 
> > 
> > The IFRS and FASB both require trading gains/losses where trading is the
> > main operation of the entity to be reported as Other Comprehensive Income
> > whereas incidental trading  gains and losses where they are not main
> > activity of the business are normally reported through normal profit and
> > loss. The situation is different for companies and for individuals at least
> > in Australia as individual's capital gains are taxed here at an individuals
> > marginal tax rate (variable stepped scale depending on assessabletaxable
> > income) whereas capital gains in companies are taxed at the company tax
> > rate.
> > 
> > The IFRS is like most standards/legislation difficult to make sense of
> > unless you have a glossary and the inital definitions etc all open at once.
> > The Australia standards pretty well follow the IFRS but there will be some
> > excpetions and the FASB is trying to converge on the IFRS and has apparently
> > in this area. From what I can gather the HGB is also IFRS based but the
> > question is how closely.
> 
> No, the base has been the german "Grundsätze ordnungsgemäßer
> Buchführung" (GOB):
> https://de.wikipedia.org/wiki/Grunds%C3%A4tze_ordnungsm%C3%A4%C3%9Figer_Buchf%C3%BChrung
> 
> But by several EU directives starting in 2002 (most parts of) IFRS
> became obligatory for public traded companies.
> 
> But smaller companies (our users) still use the GOB part of HGB.
> 
> https://de.wikipedia.org/wiki/International_Financial_Reporting_Standards#Verbindlichkeit
> and #Unterschiede_zu_nationalem_Recht
> 
> > Iy seems in most cases there are situations where
> > it is reported in income and others where it is reported in equity. I will
> > start sorting through the legisaltion and see if I can tabulate the
> > requirements in a few major jurisdictions cf the IFRS requirements. Might
> > take a while to do.  I can track down the Australian situation for companies
> > fairly easily as my daughter is a company accountant and handles reporting
> > on it all the time.
> > 
> > I seem to remember a lot of discussion fairly recently in the last couple of
> > years when Chris was updating various reports in either the Dev or User
> > forums. I'll track that down to see what light it sheds on the situation.
> 
> Yes, I did not watch changes on reports very closely.
> As I do not know the rules in other countries, but Switzerland and
> Austria have similar principles, a workaround might be to move the
> pending results out of the balance (just as it was in the old report)
> for LANG settings starting with "de".
> 
> > David
> 
> Frank
-- 
Dr David R Cousens
B.Sc, M.Prof. Acc., Ph.D., G.C.Ed