I’m having trouble working out how to deal with foreign exchange gains / losses as a result of our new currency in Zimbabwe. Unfortunately there’s quite a lot of context needed for anyone trying to understand:
Since I started my business and began using Manager last year, we’ve officially been using US dollars. I set that as my default currency. However, we’ve also had our own “Bond notes”, that have officially been 1:1 with the USD. Our bank accounts were officially in USD, but the banks didn’t actually have any USD for us to go and withdraw. So the reality was that our Bond notes and bank balances were not really of equivalent value to the USD, as we couldn’t use them for anything outside the country. The banks did, however, allow us to open foreign currency accounts too, which were backed by actual USD and that we could use to make foreign payments.
So, I had:
- 1 bank account in local currency (shown as USD, but not really the same)
- 1 bank account in foreign currency (USD)
- 1 cash account in local currency
- 1 cash account in USD
I would send customers invoices for amounts in local currency, and if they paid with USD cash I would edit the invoice to show a discount approximating the (unofficial) exchange rate of the day.
Then last week we had the announcement of the new monetary policy, which made our local currency (the Bond notes and regular bank balances) an official currency, called the RTGS$. Thankfully @lubos was quick to add it to the currency list. I’ve now changed my default currency to the RTGS$, as well as the relevant bank and cash accounts. The process was mostly pretty smooth, though the balance of one of the cash accounts was thrown way off if I changed its currency. My solution was to create a new account, do an inter-account transfer of everything from the old account to the new one, and set the old one to be inactive.
My problem now comes with exchange rates. Since our local currency was officially 1:1 with the USD, all historic transactions and inter-account transfers were done at this rate. And since officially it was all USD, that was the currency I used for all the accounts in Manager. Obviously to me the balances in one account were not necessarily worth the same as another, but officially they were the same.
So now I want to create an exchange rate between the USD and the RTGS$, but if I do that I get a large foreign exchange gain showing in my income as a result of the USD cash and bank balances I have. Where US$100 was officially the same in our local currency, it’s now worth RTGS$250 officially, and so I get a foreign currency gain of RTGS$150 for that amount.
Any suggestions for how to clear this? In any normal situation it would be completely legitimate, but ours is not a normal situation.
Should I perhaps revert my accounts to USD and create new RTGS$ accounts, transfer across at 1:1, then create my exchange rate? I’m not sure if that would even work. The more I think about it the more confused I get!
I appreciate this might not really be a Manager-specific issue, but I would welcome any suggestions, especially if they don’t involve editing all my transactions from the last six months…