[GNC] Valuation of multi-currency accounts

[john]

Pretty insightful for a newbie with no accounting background.

An excruciatingly detailed discussion of this topic can be found at https://bugs.gnucash.org/show_bug.cgi?id=797796.
One of the participants, CDB-Man, is a Canadian accountant. While the details of the discussion center around a
few transactions in a CAD book involving a USD brokerage account holding a US ETF, SPY, the general principles
illustrated are widely applicable to multi-currency accounting.

Regards,
John Ralls

> On Oct 21, 2022, at 5:49 AM, Patrick Pöndl <patrick at poendl.de> wrote:
> 
> I guess it always depends on what you want to accomplish. If you are bound
> by certain rules in your jurisdiction for tax purposes, you need to think
> how to set up your accounts in GnuCash to obey those rules. If you are
> bound by more than one jurisdiction with incompatible rules, maybe you even
> need to keep track of the same transactions in two separate set of books in
> order to stay sane.
> 
> I was just under the impression that the original poster who suggested that
> GnuCash should automatically create multi-currency subaccounts for each
> expense account was simply suggesting this in order to save time and
> effort, but was not aware what that would do to the quality of the data the
> more exchange rates change over time: ever larger balances on the trading
> accounts (which tend to eliminate meaning from the numbers) and ever
> smaller balances on the expense and income accounts in terms of the base
> currency (which do give meaning to the numbers).
> 
> I guess one approach for people who don't want to (or can't for regulatory
> purposes) convert to base currency for every single transaction would be
> this: Enter a transaction from the expense/income account denominated in a
> non-base currency to the same expense/income account denominated in your
> base currency every so often (like once a year, or whenever exchange rates
> changed significantly) to reset those accounts to zero. This way, at least
> the problem of ballooning balances on the trading accounts would be solved
> and the degradation of meaning of the numbers limited.
> 
> But as I said, I'm a newbie at GnuCash, and I don't have an accounting
> background. I just realized that this problem exists while planning my own
> initial setup of GnuCash, and I still hope that someone more experienced
> shares a method that both minimizes work and the described problem.
> 
> Patrick Poendl
> 
> Am Fr., 21. Okt. 2022 um 04:45 Uhr schrieb <gnucash-user-request at gnucash.org
>> :
> 
>> 
>> ---------- Forwarded message ----------
>> From: Michael or Penny Novack <stepbystepfarm at comcast.net>
>> To: gnucash-user at gnucash.org
>> Cc:
>> Bcc:
>> Date: Thu, 20 Oct 2022 17:59:20 -0400
>> Subject: Re: [GNC] gnucash-user Digest, Vol 235, Issue 46
>> On 10/20/2022 12:21 PM, Patrick Pöndl wrote:
>> 
>> THAT is the major issue with trying to keep multiple currencies in the
>> same set of books. WHEN is to be the time of evaluation (of one to the
>> other in terms of exchange rates). This can even be an issue for
>> accounts of type asset and liability for those who are rarely moving
>> amounts between currencies << who have accounts in both places, who have
>> income and expenses in both places --- say who live/work in one country
>> part of the year and in another the rest of the year >>
>> 
>> Since not applying to me, I have never investigated the rules of the
>> various jurisdictions. You have income in country B but your primary tax
>> country is A. What does A say about when "conversion" takes place (when
>> evaluated for income in B, taxes paid in B for which A might give
>> credit, etc.) OR if A allows you to choose the date (say the end of the
>> reporting year) how do you do that unless separate books? << since you
>> would NOT want evaluations to have been taking place as you went along >>
>> 
>> Michael D Novack
>> 
>> 
>> 
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