I suppose this question is more of an accounting question than a Ledger
question (although toward the end of my email, I get into more of a
hard-core Ledger usage question). I'm curious how others handle this,
as I know there are a lot of people on the list who use Ledger's
multi-currency support.
My problem is this: I obviously track income and expenses carefully for
my organization. We do nearly all of our activities in USD, but
occasionally, for example when we run a conference in a foreign city,
the transactions are in another currency.
Ultimately, the expenses and income ends up getting reported after its
conversion to USD, even for actions we do elsewhere. For example, if
we're running a conference in the UK, we might hold GBP for some period
of time, but once the conference is done (and we're sure it will be
months before we have another transaction to occur in that currency), we
liquidate the remaining balances into USD.
Initially, I was using a mixture of different types of commodity pricing
details, trying to match the situation best. For example, we have a
foreign exchange account, so when funds were sitting there in GBP for a
period of time, they didn't really have a fixed rate, so I *was* doing
things like this:
######################################################################
default $
2012/03/19 Company
Accrued £3,855.00
Income:Sponsorship £-3,855.00
2012/06/19 Company
Accrued £-3,855.00
Assets:GBP Acct £3,855.00
2012/08/03 Venue Payment
Assets:GBP Acct £-3,855.00
Assets:Checking £-6,145.00 {=$1.5552200}
;Assets:Checking is denominated in USD, hence using a fixated cost there.
Expenses:Venue £10,000.00
######################################################################
The problem with the above is that without a price database, ledger
can't deduce a reasonable USD price for the £3,855.00.
Not only that, but that's probably not the right way to account for the
situation in the USA. For example, this USA IRS document:
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Foreign-Currency-and-Currency-Exchange-Rates
says:
Make all income tax determinations in your functional currency. If
your functional currency is the U.S. dollar, you must immediately
translate into dollars all items of income, expense, etc. (including
taxes), that you receive, pay, or accrue in a foreign currency and
that will affect computation of your income tax. Use the exchange
rate prevailing when you receive, pay, or accrue the item.
In addition, *I* personally *don't* want the USD balance of
"Income:Sponsorship" to fluctuate based on future prices. From our
point of view, when we report in USD, the fact of the matter is that the
sponsorship had a "known value" in USD, forever at some price. I want
the income *fixed* to some value in our (as the IRS calls) our
functional currency.
Based on all that, what I'm likely going to do is something like this:
#############################################################################
default $
2012/03/19 Company
Accrued £3,855.00 {=$1.5893}
Income:Sponsorship £-3,855.00 {=$1.5893}
2012/06/19 Company
Accrued £-3,855.00 {=$1.5893}
Assets:GBP Acct £3,855.00 {=$1.5893}
2012/08/03 Venue Payment
Assets:GBP Acct £-3,855.00 {=$1.5893}
Assets:Checking £-6,145.00 {=$1.5552200}
Expenses:Venue £10,000.00 {=$1.5552200}
Expenses:Currency Loss
#############################################################################
What this says is:
Company agreed to sponsor the conference in the amount of £3,855.00
on 2012-03-19, at which time 1 GBP was worth 1.5893 USD. The company
paid on 2012-06-19, and we left the value of the GBP at 1.5893 at
that time, since that's how it was accrued and the money was just
sitting there in the GBP account *until* 2012-08-03, when we actually
spend that money (and some more from our USD-denominated checking
account, by converting it to GBP using the rate we got that day), to
pay the £10,000 bill from the venue.
In turn, this caused us to realize a currency conversion loss of
$131.38, because by the time we liquidated £3,855.00 asset
(originally accrued on 2012-03-19) to pay the bill, the GBP->USD rate
had turned against us.
Is this what others think is right, too? I'm asking that question in
two ways: (a) do you think the accounting policy is the right way to
handle the situation (given the IRS requirement) and (b) if the answer
to (a) is yes, is this the right way to represent the above textual
description in Ledger?
Finally, on a somewhat unrelated note, I'm confused about why I *must*
use an automatic balancing account in that last transaction above.
Specifically, this doesn't work:
2012/08/03 Venue Payment
Assets:GBP Acct £-3,855.00 {=$1.5893}
Assets:Checking £-6,145.00 {=$1.5552200}
Expenses:Venue £10,000.00 {=$1.5552200}
Expenses:Currency Loss $131.38
and gives this error:
> 2012/08/03 Venue Payment
> Expenses:Foreign Exchange Loss $131.38
> Assets:GBP Acct £-3,855.00 {=$1.5893}
> Assets:Checking £-6,145.00 {=$1.5552200}
> Expenses:Venue £10,000.00 {=$1.5552200}
Unbalanced remainder is:
$131.38
£3,855.00 {=$1.55522}
£-3,855.00 {=$1.5893}
Amount to balance against:
$131.38
£10,000.00 {=$1.55522}
Error: Transaction does not balance
Yet if I leave "$131.38" out, *that's* the amount that Ledger puts into
Expenses:Currency Loss for that transaction, automatically. What gives?
--
-- bkuhn
