[GNC] asset discrepancy in change of year

[John Ralls]

> On Apr 10, 2021, at 9:24 AM, Andrea Borgia <andrea at borgia.bo.it> wrote:
> 
> Il 09/04/21 18:59, John Ralls ha scritto:
>>> On Apr 9, 2021, at 9:37 AM, Andrea Borgia <andrea at borgia.bo.it> wrote:
>>> 
>>> Il giorno dom 28 mar 2021 alle ore 03:04 Christopher Lam <
>>> christopher.lck at gmail.com> ha scritto:
>>> 
>>> 
>>>> There is some discussion in an unusually detailed bug report
>>>> https://bugs.gnucash.org/show_bug.cgi?id=797796 -- this originates in
>>>> GnuCash's transaction currency being permitted to be any currency. e.g. if
>>>> your home currency is USD, but transfer GBP to EUR, the UI will record only
>>>> GBP/EUR fx. The new method would enforce the transaction currency to be USD
>>>> therefore your GBP->EUR would require GBP/USD and EUR/USD fx rates. Thus,
>>>> w.r.t. USD, all fx gains/losses are recorded accurately.
>>>> 
>>>> To fix this would be an enormous amount of work and invalidate a lot of
>>>> code, but would definitely simplify and fix a lot of code too IMHO.
>>>> 
>>> Does it apply also to mutual funds purchased in a foreign currency?
>>> For example,I operate in EUR, I change a given amount to USD and use it to
>>> purchase a USD-denominated fund.
>>> Will gnucash with the "trading account" option enabled record everything
>>> correctly or is it just the scenario mentioned in the bugreport?
>>> 
>>> 
>>> Also, by enabling trading account in the 2020 file, I managed to precisely
>>> account for the discrepancy in capital at end of year / beginning of year.
>>> Should I close this amount to my Capital:EUR account or can I just carry it
>>> forward in the trading account for 2021? I've tried entering a transaction
>>> in the trading account but it was left unbalanced, so I gave up.
>>> 
>> That's exactly the scenario discussed in bug 797796 except that the primary interlocutor's home currency is CAD rather than EUR.
>> 
>> You need to create a capital gains transaction as explained in https://www.gnucash.org/docs/v4/C/gnucash-guide/chapter_capgain.html.
> 
> Thanks, John. I suppose you're replying only to the question in the first paragraph.
> 
> 
> A few more questions:
> 
> 1) is the "trading account" option (already enabled) compatible with such a scenario?
> 
> 2) am I correct that purchases and sales of a fund quoted in my primary currency (EUR in my case) will be properly recorded simply by virtue of the trading accounts being enabled and do not require an additional transaction?
> 
> 3) the capital gain to be recorded for the USD funds: I'm not sure I understand where this occurs, perhaps when I am selling the USD to pay for the shares in the fund?
> 
> 
> 
> It's quite frustrating that I seem to understand the general idea but then I get lost in the details of the transactions to be entered!
> 
> I've tried looking at those generated by the trading accounts but it didn't really help :(

1) No, but that's separate from trading accounts. That's the point of the bug report. 

2) No, the trading accounts just make it obvious that you haven't booked the gain/loss.

3) That's back to the discussion in the bug. When you trade securities in a foreign currency you have *two* sources of gains/losses: The gain or loss realized in the foreign currency from the sale of the security and the gain or loss from converting the foreign currency back into your home currency. Study that bug and the spreadsheets that CDB-Man has attached. The basic point that CDB-Man (an actual accountant licensed in Canada) makes is that every time you touch an asset denominated in something other than your home currency the change must be converted back to your home currency and the change in home currency value booked as a gain/loss. It's possible, but difficult, to do this in GnuCash. Trading Accounts don't really help.

Regards,
John Ralls