[GNC] Exchange rate fluctuation changes historic amounts in P&L and BS

[Fred Bone]

On 29 June 2024 at 22:05, G R Hewitt said:

> Hello Everyone,
> 
> Basics:
> GnuCash 5.6; MacOS High Sierra 10.13.6
> Using Sterling as the base currency and Euros.
> 
> The problem:
> A few days ago I bought something in euros (€150) and paid for it in
> sterling (£132.27) and the GnuCash system worked out that the rate was
> 0.8818. In the P&L the item was properly shown as £132.27. The card
> account payment showed £132.27 and the euro expense account showed
> €150.00. All well and good.
> 
> I bought something else a few days later in the same manner as above, but
> the exchange rate had changed, all well and good too - card account and
> expense account transactions were correct.
> 
> On running the P&L I noted that the £132.27 of the first transaction
> above was now less at around £128 and some pence instead of the expected
> £132.27. I checked the card account and it was still at £132.27 and the
> euro account was still at €150.
> 
> Why is this and is there a way to have the correct figures shown in the
> P&L without them jumping up and down as the rate changes.

Why? Because the P&L is a (re-)valuation at a specific date (e.g. 
"today") and there's been an unrealised loss on your asset - the €150 is 
now worth only £128+ whereas you paid £132.27 for it, and you haven't 
accounted for this. (Of course, if the Euro subsequently rises enough 
against sterling this might even be reversed and become a gain.)

Consider what happens if what you bought was actual euros (such as in 
preparation for a trip to France). They cost you £132+. If you bought 
them today instead, they'd cost you £128+. You made a £4(+-) loss by 
buying too soon. That's what the P&L is telling you.

The figures ARE correct, at least insofar as you have informed Gnucash.