[GNC] Trial Balance Issue with Fund Merger

[Lisa Rowell]

On 9/1/2021 12:28 PM, John Ralls wrote:
>
>> On Sep 1, 2021, at 12:16 PM, John Ralls <jralls at ceridwen.us> wrote:
>>
>>
>>
>>> On Sep 1, 2021, at 11:15 AM, Lisa Rowell <lisa.gives.in at gmail.com> wrote:
>>>
>>>
>>> On 9/1/2021 5:27 AM, Lisa Rowell wrote:
>>>> On 8/31/2021 9:41 PM, John Ralls wrote:
>>>>>> On Aug 31, 2021, at 8:32 PM, Lisa Rowell <lisa.gives.in at gmail.com> wrote:
>>>>>>
>>>>>> I'm working my way through my account history after a massive GnuCash import, straightening out issues with missing realized capital gains/losses and came across an event that I can't figure out how to properly handle.
>>>>>>
>>>>>> I held shares of a fund called Spartan 500 Index Investor Class (FSMKX) which merged with Spartan US Equity Index Investor Class (FUSEX) at some odd rate around 1:0.513. When I did the import, I ended up with an account for FSMKX and an account for FUSEX and a manually entered exchange transaction which did a sell of FSMKX shares and a buy of FUSEX shares with no share price. This got everything balanced out as far as share counts go, but now I'm finding it's showing up as being not correct in the Trial Balance. It looks to me like the exchange is being interpreted as if an actual sell event had taken place.
>>>>>>
>>>>>> Can GnuCash properly account for this? The case in the manual's More Complex Merger example is a bit different because the example stock continued to trade under the same symbol, so that solution doesn't map well. I found a past mailing list thread that said that the proper way to account for this is as a sell transaction of the going away fund and a buy transaction of the fund that lives on with an accompanying Realized Gain transaction. This doesn't seem right to me though since I didn't sell the shares and did not realize a gain and I don't even have prices for the time of the merger. In my way of looking at it, the gain calculation should come at the time of sale and be based on purchase price of the various share amounts, and not at the time of the merger, since that maps to the tax view of things where I live.
>>>>>>
>>>>>> I understand that GnuCash wouldn't be able to calculate the realized gains post merger, and I'm ok with doing that in a side spreadsheet, but am more looking for a way around the bogus realized gain entry at the time of merger just to make the Trial Balance happy.
>>>>> If you're not too compulsive and since this is presumably ancient history in a personal book one simple way to deal with it would be to pretend that you bought the FUSEX in the first place and ignore the FSMKX, but that might be a little painful if you have a bunch of reinvested FSMKX dividend transactions that you'd also need to change.
>>>>>
>>>>> I've handled similar situations in the past by doing a simple transfer transaction between the two accounts, as in CR FSMKX 513 and DR FUSEX 1000. As long as there's no currency component to the transaction it shouldn't create a trading imbalance in the book currency.
>>>>>
>>>>> Regards,
>>>>> John Ralls
>>>> That solution was what worked for me for share transfers between brokerages, where the commodity was the same, but when I changed commodities it somehow shows up as a mismatch in the Trial Balance. I don't have a share price for the shares in either split so, in theory it shouldn't involve the book currency at all. I don't get it at all.
>>>>
>>>> I'm sure it's this transaction since the balances match on the previous day and the only other transaction on this date is a paycheck deposit in the book currency that's no where near the amount of the imbalance. The transaction is in the image attached, that's what you're advocating, right?
>>>>
>>>> Thanks.
>>>>
>>>> Lisa R.
>>>>
>>> Additional information:
>>>
>>> Removing the cross commodity sell/buy transaction does remove the Trial Balance discrepancy. Additionally I added up all of the purchase prices of shares of the fund being merged away and that amount does equal to the credit / debit difference in the report.
>>>
>> It is, but that doesn't quite work. Here's a sample that does:
>> If you don't price the share transfer to the currency (USD in both examples) the trial balance logic assumes 0 and calculates a loss. To avoid that enter the book value of the shares you're transferring as a sell (credit) amount in the source split and a buy (debit) amount in the destination split:
>>
> Unfortunately my screen shot didn't make it to the list. It contained the following transactions:
>
> 1/23/19   Buy PIODX 1000          Brokerage Account    1000         25.0000    25,000.00                 1,000
> 2/28/19   Reinv PIODX 11.231      Brokerage Account      11.231     22.2598       250.00                 1,011.231
> 9/1/21    Transfer to PXXXX                           -1011.231                            1,011.231         0
>                                    PXXXX                1971.211     12.8094    25,250.00
>                                    PIODX               -1011.231     24.9698               25,250.00
>
> The last transaction is in split view showing the identical cash amounts for the two stock accounts. Enter the amounts and let GnuCash compute the prices to prevent rounding errors from causing a gain/loss.
>
> Regards,
> John Ralls

I got the image in email, and it cleared things up for me. It looks to 
me like you put in the sell book currency amount as not the value on the 
date of the merger, but rather the basis for the shares being converted, 
thus making the it look like there is no gain/loss being realized. I 
suspect this simplifies dealing with gains/loss calculation on the post 
merger shares as well.

The one issue I see with this as a solution is that it creates incorrect 
prices in the price database, which I assume would mess up a Network 
Report. I'm not sure this bothers me in this case.

Thanks for getting me back on track, it's greatly appreciated.

Lisa R.


>