The developer is looking into potential problems with exchange rates.
After thinking carefully about this, it may be fine as it is.
If adjusting the exchange rate changes all balances, then really what is needed, is to record all transactions throughout the year using the exchange rate for that day.
Income will either increase or decrease on previously received money, and that’s fine because it’s value really has increased or decreased.
The foreign account on the balance sheet will display in base currency as increased or decreased inline with income.
Gains or losses only occur on real transfers. So will occur as with the (day 10) example above so the timing is irrelevant.
All that is required is a year end adjustment (exchange rate update) on the final day to ensure accuracy for reporting.
Any gains / losses are valid and will not occur again, because the same transfer can’t be done twice.
Any further gains or losses in the next period are valid because the remaining value of the foreign cash account has not previously been transferred, so once translated will either increase or decrease.
I actually think now that it’s fine.
Do we all agree?
I’m not sure we do agree. Some of what you’ve written makes sense upon first reading. But it is still bothering me that transactions from the past could be affected by a newly entered exchange rate. For example, if money came in and went out via different currencies, gains/losses could be realized. But the relevant transactions and rates should not change just because some time later a new rate is entered. The foreign currency cash account from the first set of transactions might literally have been emptied, then refilled. In that situation, two groups of transactions might be completely unrelated.
I don’t use multi-currency capability in my real business, so I have not developed a good feel for how it all works in Manager. When I play games in my test company, it is difficult to envision and simulate all the possibilities. So I’m waiting on a review by the developer–and possibly his chief accounting advisor.
Balance sheet always shows figures in base currency. It will use the latest exchange rate to show what is the value of foreign currency account in base currency. So yeah, even if you have $1,000 USD in account whole year, the GBP value as reported on balance sheet will keep changing based on the latest exchange rate.
I get your point that if you hold USD currency in a bank account and your base currency is GBP and USD appreciates in value, then you will make a gain. And you don’t want to pay taxes on these gains.
That’s why tax authorities are differentiating between realized and unrealized exchange gains. Unrealized exchange gains are typically not subject to income tax. Manager currently doesn’t have a report to differentiate between realized and unrealized gains. It lumps up both together. That’s something to be added in future.
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Thanks for your reply,
Adding the unrealized and realized gains feature would definitely be useful.
Currently I have noticed a strange issue.
In the summary section where I can see translation gains/loss - when I click this to see a breakdown of the gain/loss
I can see that there are various FX rates which seem to appear on their own. Even though I have not updated the FX rates, and there have been no transactions recorded during these times.
Can someone explain why this is?
It’s creating gains of for example £0.01 - not exactly a large amount, but still it makes no sense if nothing has changed at all.