[GNC] closing of books and multiple currencies: a question on exchanges

[David Cousens]

Andrea,

Unfortunately I do not think that there is "One true way to do it in
accounting". There are certainly some basic principles but it is
particularly difficult when your operations are in several countries. My
step son has a similar problem as he is a pro soccer player  and has played
internationally for a number of years. There are no uniform taxation,
industrial relations and employment laws country to country and most
countries have a different set of rules for foreign residents and their own
citizens. Most will require you to pay tax on any income earned in the
country, but in some cases your home country may also want to tax you again
although most but not all have provisions against double taxation.  If you
are still working overseas  at times you will need to find an accountant who
is experienced at handling multiple jurisdictions preferably with experience
in the countries you are working in

In cases where you have assets in a foreign country held in that countries
currency and transactions in that country are carried out in that currency
it would certainly make sense to maintain asset, liability and income and
expense accounts in that countries currency, particularly if you are liable
for tax on income earned there as well as tax wherever you are primarily
based on income earned there.

Ultimately if your objective is to know your net worth, it is obviously
easier if that is in a single currency but where you have assets in multiple
currencies, the value of these in your base currency is not fixed but is
varying with exchange rates. A reasonable approach would be to have a
balance sheet in each currency at a given point in time and then convert to
your base currency to produce an overall balance sheet in your base
currency. I am not sure if the report system does that automatically in
Gnucash as I haven't had any need to use such features since i have been
using it. Someone else may be able to comment on that.

On the mutual fund purchase. It is most likely that the fund will have paid
US taxes on its earnings so you are unlikely to be liable for any tax in the
US so there is likely little value in maintaining US expense or income
accounts. I base that un professional opinion only on general principles
that most fairly civilized countries operate under, not any specific
knowledge of either US or Italian taxation laws. At least in Europe ( now
apart from Britain) these were generally becoming fairly uniform. If you are
liable for Italian taxes on the fund dividends and gains, then it is likely
you will have to convert any amounts to Euro for taxation purposes in any
case, so it would make sense to me to keep the expense and income accounts
in the currency you will be taxed in and convert any transactions involving
a foreign currency to that currency using the exchange rate at the time of
the transaction.  That is how I would and do record any transactions in US
currency but I am retired and my tax and financial situation is extremely
simple and primarily single currency in Australia

It really depends totally on the complexity and nature of your financial
dealing as to what is appropriate in a particular case and for that you will
need local accounting and financial expertise.  Generally though if your
books reflect exactly what happens and when, a competent accountant can
always put them into any form necessary for specific purposes. We can really
only give advice on the program and its operation and how to achieve a
desired recording using GnuCash once you know what recording is necessary
and appropriate for your circumstances. God luck!

David



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David Cousens
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