Income in foreign currency - unrealized vs realized gain/loss How To

ideas
1

Dear community,

Residing in Australia, I work with US customers and get paid in US dollars (foreign currency). I don’t always convert money from USD to AUD, and if I do, it’s usually an arbitrary amount on an arbitrary day.

Now, how do I setup Manager, and what would be the corresponding income and exchange transactions, in order to be able to report both unrealized and realized currency exchange gains and losses?

Here’s how I see it (simplified):

Income
... US Client A
Assets
... US Bank
... AU Bank
Trading:Currency (some kind of automatic accounts?)
... AUD
... USD

When I got paid USD 1000, I recorded the first transfer:

Income:US Client A => Assets:US Bank
USD $1000

This was worth AUD $1500 at 1.5 AUD = 1 USD, but I left it in USD.

Also, AUD $1500 is what I will have to report in my business activity statement for GST purposes - i.e. the amount in AUD converted with using the exchange rate of the transaction date.

Next, say in 1 month time, I convert USD $100 to AUD $130 at 1.3

My understanding is this transaction should generate a realized loss of AUD$20

At the end of the financial year, in my report to the taxation office I need to put something like this:

Taxable Income: AUD $1500
Deductible Expenses:
... Realized currency exchange loss: AUD $20

Questions:

  1. Is this how Manager would calculate realized currency exchange gain/loss?

  2. What of the approaches available does Manager use technically for multi-currency double-entry accounting?

  3. In Manager, can I specify transaction exchange rate that is different to the one found in the currency exchange table for the same date, but still leave the latter unaffected by the rate specified in the transaction?

Please advise. – Many thanks, Anton

2
  1. Manager is not currently able to split exchange gains and losses into realized and unrealized. It will be a separate report. Manager already has all the data so it’s really down to adding the report which will do the calculations.
  2. None. Manager is using completely different approach. But it doesn’t matter what Manager is doing internally, the most important thing is that your currency gains / losses will be what they should be. You should experiment with various foreign exchange transactions (test whatever scenario you can think of) and see Manager will do the correct calculations.
  3. You can. When you make transaction in currency A which affects account in currency B, you will be able to enter amount in currency A and also in currency B. This overrides whatever exchange rate you have set under Settings.
1 Like
3

Thanks!

Just to make sure: if I do so (i.e. enter amount in currency A and also in currency B), will it make other transactions on the same day without the explicit exchange rate still use the rate from the tables?

Also, what if a transaction does not specify an exchange rate explicitly, and I change the exchange rate of that date in the exchange rate tables AFTER I enter the transaction - will the updated rate automatically affect that transaction?

This is really good to know.

In my particular case, it is the factor that lets me consider whether I can use Manager for my accounting or not - because I need to report only realized gains/loss in my Business Activity Statements in Australia (BAS) and/or Tax Lodgement (since realized losses are deductible).

So, is there any way to build a custom report manually in the Admin Console to get the realized gain/loss only, and if so, how do I make it FIFO? - related topic discussing how FIFO/FILO/… affects realized gain/loss calculation here

If there is no way to build such a report, is there any ETA for this feature?
– many thanks, Anton

4

Yes. The rate from the Settings is fallback if explicit conversion is not specified.

Yes it will. Manager is calculating everything on-demand so it doesn’t matter in which order you enter the data. It will always interpret the data as at. That principle applies everywhere, not just multi-currency accounting.

This is out of scope for custom reports. I do not have ETA but this year the entire general ledger engine has been rewritten to make this report possible (among other things). So the foundation is already in Manager.

Until the report is available, you would need to make an educated guess.

1 Like
5

I see, thanks for clarifying!

Would you suggest what reports in Manager would work best to copy from and then calculate realized gain/loss manually e.g. in Excel?

6

Could anyone address my question here please?

Also, most importantly, did you happen to implement this feature since then?

7

I’ve put this topic into ideas since we do not have a feature request covering this issue yet.

8

Okay, so what would it take to introduce such a feature now that “the foundation is already in Manager”.

Note that none of QuickBooks or Xero have this, so it probably means it is either a) not very demanded, or b) people who receive income in foreign currencies just don’t bother to calculate and claim P&L. Another note is that post-COVID era will have more people working remotely, so the number of cases described would increase.