Re: [GNC] unrealized gain / losses for mutual funds

[Michael or Penny Novack]

These points being said, there have been suggestions made in this 
list by others more qualified than I on the circumstances in which a 
user might need to track unrealized gains and account for them on an 
ongoing basis. I believe the term they used was "mark to market." You 
might look for those threads in the list archives.



Not just "mark to market", and in fact, it is so long since I had to 
look at this, I am not sure that in the example I gave you also had to 
"mark to market" (include changes in the price of the commodity). It has 
been many decades since I had to worry about things like what was needed 
to figure "personal property tax" on livestock. I'm in my late 70's now, 
can't remember << and in any case, for us it was "incidental", not 
primary economic activity, so followed those rules--- I wrote software 
for my living >>


Look, if you have  a thousand pounds of silver, if you don't buy or sell 
any, the quantity of silver remains constant, and any change in value 
would be due to changes in the price of silver.


But if you had a thousand acres of woodland, currently forested at 5,000 
board feet/acre (young trees, many below marketable size) some  years 
down the road there might be 10,000 board feet/acre (trees that were 
marketable, now larger AND some that were below market size now 
marketable size). This is in addition to the "mark to market" from 
changes like the price per board foot of that sort of wood going from 
$200/kboard feet to $250/kboard feet.


In other words, having a thousand pounds of silver  is not the same as 
having a thousand head of cattle. If you have 1000 pounds of silver and 
five years later you sell 200 pounds of silver, how many pounds of 
silver do you have left? (you can answer that). But if you have 1000 
head of cattle and five years later you sell 200 head, how many do you 
have left? (not enough information; how many were born and how many died 
in those five years). That is a separate matter from the price of beef 
on the hoof.


Michael D Novack

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Re: [GNC] unrealized gain / losses for mutual funds

[Andrea Borgia]

Il 19/05/22 00:50, davidcousen...@gmail.com ha scritto:

You need a sub account of your asset account and a corresponding account in
Equity which you could call a revaluation reserve or something similar. This
account can be either in Equity itself or could be an Income or Expense account
(which is included in profit and loss). Which is appropriate to use depends upon
many factors, the asset, the rules that apply to that asset class in your
jurisdiction including tax legislation etc., whether the gains or losses are or
are not taxable (generally not but as Mike points out not always). These sort of
considerations with regard to the reporting requirements will determine exactly
where in an account heirarchy this account should be positioned. This is where
you need accounting advice relevant to your jurisdiction and your personal
situation.


Thank you, David: this is what I was looking for! Automation isn't 
really worth the effort for my use case, planned use is only at year end.


In light of this, would your suggestion be better, equivalent or worse 
than recording a fake sale? After all, in the following year I am 
already recording a fake purchase (at the same price, the same amount of 
shares and the same overall value).



Andrea.


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Re: [GNC] unrealized gain / losses for mutual funds

[Andrea Borgia]

Il 18/05/22 16:46, David T. ha scritto:


First, the analogy of a painting's unrealized gains to those of any 
other asset is perfectly valid. The only difference is that there is 
only one "share" of the painting, while there are many shares of a 
stock or mutual fund. Their change in value is going to be the 
unrealized gain or loss.


The analogy breaks down, however, when one tries to post the adjustment 
from the fund's register ;(



Second, my (admittedly very basic) understanding of accounting is that 
unrealized gains, from an accounting perspective *don't exist.* You 
don't have the gains until you sell the asset. Gnucash applies this 
concept rather strictly.


These points being said, there have been suggestions made in this list 
by others more qualified than I on the circumstances in which a user 
might need to track unrealized gains and account for them on an 
ongoing basis. I believe the term they used was "mark to market." You 
might look for those threads in the list archives.


Ok, thanks for the pointer, I found something useful among older posts:

https://lists.gnucash.org/pipermail/gnucash-user/2015-November/062899.html 
(mark to market)


https://lists.gnucash.org/pipermail/gnucash-user/2017-January/068284.html 
(the report mentioned here seems to work but it's just a report)


https://lists.gnucash.org/pipermail/gnucash-user/2017-January/068274.html 
(except for the regulatory reasons, I'm in the same situation: trading 
accounts and books closed at end of year)


https://lists.gnucash.org/pipermail/gnucash-user/2016-December/068103.html 
(my situation...)



Andrea.


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Re: [GNC] unrealized gain / losses for mutual funds

[Andrea Borgia]

Il 18/05/22 23:47, Michael or Penny Novack ha scritto:

Because we lack "qualifications", seek professional guidance on WHAT 
to do. We can then help with the "how to do that using gnucash". 
Especially in this specific case of "art held as an investment" 
because you might actually be doing this but want it treated as 
"incidental" depending on which way more tax favorable.



It is worth pointing out that the "how" is what I'm after, here.

The taxation is automatically handled by the bank, either periodically 
or when moving fund shares, as a proxy for the country tax administration.



Andrea.

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Re: [GNC] unrealized gain / losses for mutual funds

[Andrea Borgia]

Il 18/05/22 16:03, David Carlson ha scritto:

Perhaps your question is not clear if it wasn't answered by several 
replies hinting that accountants treat various types of assets 
differently.


Actually, yours was the first reply I got :)


I am not an accountant,  so I  cannot know how well GnuCash treats the 
various types, but I would expect it to work reasonably well when 
currencies and publicly traded securities are tracked.


It is quite possible that I do not know which function to use, I know.


Andrea.

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Re: [GNC] unrealized gain / losses for mutual funds

[David T. via gnucash-user]

I know what NFT stands for; I don't see how they have any effect on the concept 
of gains. You buy something at one price. You sell it at a different price. The 
difference is your gain (loss). Whether it's a painting, a stock, an NFT, or a 
parcel of land doesn't affect the idea of a gain. 

And who owns a small piece of a Degas?

On May 18, 2022 8:44:50 PM EDT, Kenneth Schneider  
wrote:
>
>
>Ken Schneider 
>
>> On May 18, 2022, at 3:52 PM, D  wrote:
>> 
>> 
>> I have no idea how NFTs change the concept of gains. 
>> 
>> And suggesting that tax laws in the US are going to adopt these guidelines 
>> is speculation at best. More likely it's wishful thinking-- or tilting at 
>>> 
>NFT, Nonfungible token. Liken to owning a small piece of a painting but never 
>the whole thing.
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Re: [GNC] unrealized gain / losses for mutual funds

[Kenneth Schneider]

Ken Schneider 

> On May 18, 2022, at 3:52 PM, D  wrote:
> 
> 
> I have no idea how NFTs change the concept of gains. 
> 
> And suggesting that tax laws in the US are going to adopt these guidelines is 
> speculation at best. More likely it's wishful thinking-- or tilting at 
>> 
NFT, Nonfungible token. Liken to owning a small piece of a painting but never 
the whole thing.
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Re: [GNC] unrealized gain / losses for mutual funds

[davidcousens49]

Andrea

The mechanism for recording unrealized gains and losses is basically fairly
simple but the devil is as usual in the detail. 

You need a sub account of your asset account and a corresponding account in
Equity which you could call a revaluation reserve or something similar. This
account can be either in Equity itself or could be an Income or Expense account
(which is included in profit and loss). Which is appropriate to use depends upon
many factors, the asset, the rules that apply to that asset class in your
jurisdiction including tax legislation etc., whether the gains or losses are or
are not taxable (generally not but as Mike points out not always). These sort of
considerations with regard to the reporting requirements will determine exactly
where in an account heirarchy this account should be positioned. This is where
you need accounting advice relevant to your jurisdiction and your personal
situation.

When the asset increases in value the asset sub account is debited and the
corresponding equity account is credited (and vice versa when a decrease in
value occurs). The sub account totals into the asset value. If you are doing
this it would also be common practice to have the purchase value of the asset
also recorded in a separate sub-account so you can track its value for capital
gains purposes in which you would also track events which could affect its cost
basis for CGT if appropriate,. The asset's current value being the total of the
sub-accounts with the asset account itself a placeholder. This will put the
changes in valuation onto the balance sheet. It will also likely affect other
reports (e.g. profit and Loss) depending on where the second account is located.

To automate this would require a process which takes place automatically
whenever the price for the asset recorded in the price database changes which
generates the appropriate debits and credits relative to the last price recorded
in the database and puts then into a transaction affecting the above accounts.
This is not a simple process as this would occur only for certain specific
assets or asset classes, and the appropriate account structures associated with
the asset and its unrealized gains would need to mapped to each asset class for
which this was to apply to. The existing data structures most likely would need
some extension to accommodate this (I haven't looked at this aspect
particularly). This likely means a lot of checking for unwanted and undesirable
effects on the existing functionality during implementation and coding changes
affecting a fair bit of the code base. I'm sure there are other issues which
this would affect I haven't the depth of knowledge about the code base to
appreciate at this point.

You could do the above manually whenever you wish to record a change in
valuation of the asset at whatever period suits your purpose.

David Cousens

On Wed, 2022-05-18 at 08:32 +0200, Andrea Borgia wrote:
> Any ideas? Was my question perhaps not sufficiently clear?
> 
> Il giorno dom 15 mag 2022 alle ore 17:15 Andrea Borgia 
> ha scritto:
> 
> > Hello.
> > 
> > 
> > Trying to improve my book-keeping, I would like to tackle this issue now
> > so I went to the documentation, precisely "11.4.1. Unrealized Gains".
> > 
> > Problem is, the example applies to a painting, that is an object whose
> > value changes, not shares whose number remains constant but whose value
> > changes, thus leading to a change in total valuation.
> > 
> > 
> > Since the end goal is to derive unrealized P and then include those in
> > the economic result for the year, I thought I could record a fake sale,
> > after all at book opening the next year I do a fake purchase (with same
> > price, just one day apart). If this makes sense, how do I compute the
> > P given the new price? Must I do that manually with a split or is
> > there some kind of assistance by GnuCash?
> > 
> > 
> > Thanks,
> > 
> > Andrea.
> > 
> > 
> > 
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Re: [GNC] unrealized gain / losses for mutual funds

[Michael or Penny Novack]

On 5/18/2022 10:46 AM, David T. via gnucash-user wrote:

A couple of points here:

First, the analogy of a painting's unrealized gains to those of any other asset is 
perfectly valid. The only difference is that there is only one "share" of the 
painting, while there are many shares of a stock or mutual fund. Their change in value is 
going to be the unrealized gain or loss. The math for gain on a single item is simple, 
making the example perhaps easier to comprehend, at the risk of oversimplification the 
questions.



There are OTHER assets (investments) where you might want to track 
"unrealized/tentative" gains and in fact there are cases where you are 
required to. This might depend on whether "incidental" or one of your 
major activities << I had to learn the difference with regard to "forest 
land" when neighboring land was being logged and we allowed the haul out 
across a narrow neck connecting larger tracts of our land. To have 
hauled around would have caused more environmental damage --- for ME, 
the "stumpage" counted as "incidental" --- I would have had to file 
differently (and be keeping nooks differently) had I been holding forest 
land as an investment.


Because we lack "qualifications", seek professional guidance on WHAT to 
do. We can then help with the "how to do that using gnucash". Especially 
in this specific case of "art held as an investment" because you might 
actually be doing this but want it treated as "incidental" depending on 
which way more tax favorable.


Michael D Novack



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Re: [GNC] unrealized gain / losses for mutual funds

[D via gnucash-user]

I have no idea how NFTs change the concept of gains. 

And suggesting that tax laws in the US are going to adopt these guidelines is 
speculation at best. More likely it's wishful thinking-- or tilting at 
windmills.



On May 18, 2022, 15:03, at 15:03, Kenneth Schneider  
wrote:
>
>
>Ken Schneider 
>
>> On May 18, 2022, at 10:49 AM, David T. via gnucash-user
> wrote:
>> 
>> A couple of points here:
>> 
>> First, the analogy of a painting's unrealized gains to those of any
>other asset is perfectly valid. The only difference is that there is
>only one "share" of the painting, while there are many shares of a
>stock or mutual fund. Their change in value is going to be the
>unrealized gain or loss. The math for gain on a single item is simple,
>making the example perhaps easier to comprehend, at the risk of
>oversimplification the questions. 
>
>With introduction of NFT’s this no longer stamped in concrete.
>
>> 
>> Second, my (admittedly very basic) understanding of accounting is
>that unrealized gains, from an accounting perspective *don't exist.*
>You don't have the gains until you sell the asset. Gnucash applies this
>concept rather strictly. 
>
>If you live in the U.S. our illustrious leaders have indicated that
>they would like taxing gains as the occur in a held investment. Whether
>this happens or not is anyone’s guess.
>
>> 
>> These points being said, there have been suggestions made in this
>list by others more qualified than I on the circumstances in which a
>user might need to track unrealized gains and account for them on an
>ongoing basis. I believe the term they used was "mark to market." You
>might look for those threads in the list archives. 
>> 
>> David T. 
>
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Re: [GNC] unrealized gain / losses for mutual funds

[Kenneth Schneider]

Ken Schneider 

> On May 18, 2022, at 10:49 AM, David T. via gnucash-user 
>  wrote:
> 
> A couple of points here:
> 
> First, the analogy of a painting's unrealized gains to those of any other 
> asset is perfectly valid. The only difference is that there is only one 
> "share" of the painting, while there are many shares of a stock or mutual 
> fund. Their change in value is going to be the unrealized gain or loss. The 
> math for gain on a single item is simple, making the example perhaps easier 
> to comprehend, at the risk of oversimplification the questions. 

With introduction of NFT’s this no longer stamped in concrete.

> 
> Second, my (admittedly very basic) understanding of accounting is that 
> unrealized gains, from an accounting perspective *don't exist.* You don't 
> have the gains until you sell the asset. Gnucash applies this concept rather 
> strictly. 

If you live in the U.S. our illustrious leaders have indicated that they would 
like taxing gains as the occur in a held investment. Whether this happens or 
not is anyone’s guess.

> 
> These points being said, there have been suggestions made in this list by 
> others more qualified than I on the circumstances in which a user might need 
> to track unrealized gains and account for them on an ongoing basis. I believe 
> the term they used was "mark to market." You might look for those threads in 
> the list archives. 
> 
> David T. 

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Re: [GNC] unrealized gain / losses for mutual funds

[David T. via gnucash-user]

A couple of points here:

First, the analogy of a painting's unrealized gains to those of any other asset 
is perfectly valid. The only difference is that there is only one "share" of 
the painting, while there are many shares of a stock or mutual fund. Their 
change in value is going to be the unrealized gain or loss. The math for gain 
on a single item is simple, making the example perhaps easier to comprehend, at 
the risk of oversimplification the questions. 

Second, my (admittedly very basic) understanding of accounting is that 
unrealized gains, from an accounting perspective *don't exist.* You don't have 
the gains until you sell the asset. Gnucash applies this concept rather 
strictly. 

These points being said, there have been suggestions made in this list by 
others more qualified than I on the circumstances in which a user might need to 
track unrealized gains and account for them on an ongoing basis. I believe the 
term they used was "mark to market." You might look for those threads in the 
list archives. 

David T. 

On May 18, 2022 10:03:47 AM EDT, David Carlson  
wrote:
>Andrea,
>
>Perhaps your question is not clear if it wasn't answered by several replies
>hinting that accountants treat various types of assets differently. I am
>not an accountant,  so I  cannot know how well GnuCash treats the various
>types, but I would expect it to work reasonably well when currencies and
>publicly traded securities are tracked.
>
>GnuCash generally does not work very well tracking unrealized gains, as you
>have noted.  The documentation doesn't  either.
>
>If the documentation were improved to describe how GnuCash actually does
>work with other asset types than art objects,  such as currencies  and
>securities that are publically traded on Wall Street or the Chicago Board
>of Trade,  I would consider that a major step forward.
>
>On Wed, May 18, 2022, 1:33 AM Andrea Borgia  wrote:
>
>> Any ideas? Was my question perhaps not sufficiently clear?
>>
>> Il giorno dom 15 mag 2022 alle ore 17:15 Andrea Borgia <
>> and...@borgia.bo.it>
>> ha scritto:
>>
>> > Hello.
>> >
>> >
>> > Trying to improve my book-keeping, I would like to tackle this issue now
>> > so I went to the documentation, precisely "11.4.1. Unrealized Gains".
>> >
>> > Problem is, the example applies to a painting, that is an object whose
>> > value changes, not shares whose number remains constant but whose value
>> > changes, thus leading to a change in total valuation.
>> >
>> >
>> > Since the end goal is to derive unrealized P and then include those in
>> > the economic result for the year, I thought I could record a fake sale,
>> > after all at book opening the next year I do a fake purchase (with same
>> > price, just one day apart). If this makes sense, how do I compute the
>> > P given the new price? Must I do that manually with a split or is
>> > there some kind of assistance by GnuCash?
>> >
>> >
>> > Thanks,
>> >
>> > Andrea.
>> >
>> >
>> >
>> ___
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Re: [GNC] unrealized gain / losses for mutual funds

[David Carlson]

Andrea,

Perhaps your question is not clear if it wasn't answered by several replies
hinting that accountants treat various types of assets differently. I am
not an accountant,  so I  cannot know how well GnuCash treats the various
types, but I would expect it to work reasonably well when currencies and
publicly traded securities are tracked.

GnuCash generally does not work very well tracking unrealized gains, as you
have noted.  The documentation doesn't  either.

If the documentation were improved to describe how GnuCash actually does
work with other asset types than art objects,  such as currencies  and
securities that are publically traded on Wall Street or the Chicago Board
of Trade,  I would consider that a major step forward.

On Wed, May 18, 2022, 1:33 AM Andrea Borgia  wrote:

> Any ideas? Was my question perhaps not sufficiently clear?
>
> Il giorno dom 15 mag 2022 alle ore 17:15 Andrea Borgia <
> and...@borgia.bo.it>
> ha scritto:
>
> > Hello.
> >
> >
> > Trying to improve my book-keeping, I would like to tackle this issue now
> > so I went to the documentation, precisely "11.4.1. Unrealized Gains".
> >
> > Problem is, the example applies to a painting, that is an object whose
> > value changes, not shares whose number remains constant but whose value
> > changes, thus leading to a change in total valuation.
> >
> >
> > Since the end goal is to derive unrealized P and then include those in
> > the economic result for the year, I thought I could record a fake sale,
> > after all at book opening the next year I do a fake purchase (with same
> > price, just one day apart). If this makes sense, how do I compute the
> > P given the new price? Must I do that manually with a split or is
> > there some kind of assistance by GnuCash?
> >
> >
> > Thanks,
> >
> > Andrea.
> >
> >
> >
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Re: [GNC] unrealized gain / losses for mutual funds

[Andrea Borgia]

Any ideas? Was my question perhaps not sufficiently clear?

Il giorno dom 15 mag 2022 alle ore 17:15 Andrea Borgia 
ha scritto:

> Hello.
>
>
> Trying to improve my book-keeping, I would like to tackle this issue now
> so I went to the documentation, precisely "11.4.1. Unrealized Gains".
>
> Problem is, the example applies to a painting, that is an object whose
> value changes, not shares whose number remains constant but whose value
> changes, thus leading to a change in total valuation.
>
>
> Since the end goal is to derive unrealized P and then include those in
> the economic result for the year, I thought I could record a fake sale,
> after all at book opening the next year I do a fake purchase (with same
> price, just one day apart). If this makes sense, how do I compute the
> P given the new price? Must I do that manually with a split or is
> there some kind of assistance by GnuCash?
>
>
> Thanks,
>
> Andrea.
>
>
>
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Re: [GNC] unrealized gain / losses for mutual funds

[Michael or Penny Novack]

Problem is, the example applies to a painting, that is an object 
whose value changes, not shares whose number remains constant but 
whose value changes, thus leading to a change in total valuation.


There's no accounting difference between a painting and a share of 
stock, though using a painting for the example forecloses the 
opportunity to discuss a long-running account having multiple 
purchases and sales of the asset type because Degas paintings are 
one-offs while shares of, say, Apple are fungible.


I don't think he is talking about A painting or other singular work of 
art but shares of a fund investing in non-fungible art. So you could 
think of it like shares that could be bought or sold except I think this 
is likely in an IRA, Roth IRA, 401k, etc, so you aren't doing that << if 
there are multiple investment options can shift between >>


Michael


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Re: [GNC] unrealized gain / losses for mutual funds

[john]

> On May 15, 2022, at 8:15 AM, Andrea Borgia  wrote:
> 
> Since the end goal is to derive unrealized P and then include those in the 
> economic result for the year, I thought I could record a fake sale, after all 
> at book opening the next year I do a fake purchase (with same price, just one 
> day apart). If this makes sense, how do I compute the P given the new 
> price? Must I do that manually with a split or is there some kind of 
> assistance by GnuCash?

That's called marking to market and it's not directly supported by GnuCash. 
You'll have to manually "sell" your assets at the FMV on the last day of the 
old accounting period and buy them at that same FMV on the first day of the new 
period. You'll compute cap gains on the sale as usual but you'll maintain 
separate realized and unrealized cap gain income accounts. When you finally 
sell the asset for real you'll create a pair of splits that transfers all of 
the unrealized capital gains for those shares to the realized cap gains 
account. That won't be too hard as long as you buy and sell whole positions all 
at once--e.g. you bought 100 shares of AAPL and sold them all at once later 
without ever buying or selling in between. If that's not how you invest then 
you'll have to either invent a way of keeping track of each purchase lot or an 
average-cost model. For a discussion of the latter see 
https://bugs.gnucash.org/show_bug.cgi?id=797796 
.

The Balance Sheet report automatically computes an Equity:Unrealized Gains line 
item if you use the "price nearest to report date" price source option. You can 
compute that as an income value by comparing it to the same line item for the 
previous period.

Regards,
John Ralls

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Re: [GNC] unrealized gain / losses for mutual funds

[john]

> On May 15, 2022, at 8:15 AM, Andrea Borgia  wrote:
> 
> Problem is, the example applies to a painting, that is an object whose value 
> changes, not shares whose number remains constant but whose value changes, 
> thus leading to a change in total valuation.

There's no accounting difference between a painting and a share of stock, 
though using a painting for the example forecloses the opportunity to discuss a 
long-running account having multiple purchases and sales of the asset type 
because Degas paintings are one-offs while shares of, say, Apple are fungible.

> On May 15, 2022, at 8:43 AM, Michael or Penny Novack 
>  wrote:
> 
> Likewise your "pictures" asset account (I take it that this is a mutual fund 
> investing in "unfungible assets" like artworks)

No, it's about the example in the Tutorial and Concepts Guide. The author chose 
to be cute and use a painting as the example asset.


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Re: [GNC] unrealized gain / losses for mutual funds

[Michael or Penny Novack]

On 5/15/2022 11:15 AM, Andrea Borgia wrote:
Trying to improve my book-keeping, I would like to tackle this issue 
now so I went to the documentation, precisely "11.4.1. Unrealized Gains".


Problem is, the example applies to a painting, that is an object whose 
value changes, not shares whose number remains constant but whose 
value changes, thus leading to a change in total valuation.


Since the end goal is to derive unrealized P and then include those 
in the economic result for the year, I thought I could record a fake 
sale, after all at book opening the next year I do a fake purchase 
(with same price, just one day apart). If this makes sense, how do I 
compute the P given the new price? Must I do that manually with a 
split or is there some kind of assistance by GnuCash? 



Let's try to clarify WHAT you are trying to do before considering the "how".

I am taking a GUESS as to what you want (and where you want to see it). 
You need to correct what is wrong about the guess. Asking "is this what 
you want?" and then refining that is how a "business analyst" works << 
the client actually knows the answer, but not until prompted by the 
analyst's questions >> You ave a retired senior business analyst here.


Is your situation such that reports based solely on actuals would 
present a grossly distorted picture of your financial situation.? In 
other words, things like the unrealized gains of an investment might be 
too large a fraction to be ignored? << this is common for the very 
wealthy who structure things to minimize their income taxes >>


In other words, you want a statement of income and expenses to show 
these unrealized gains (but of course separate from actual income which 
might be subject to taxation?


If THIS is what you want, you would NOT have to arrange a "fake sale" to 
do this. You would partition "income" into ":real income" and 
"unrealized income" << all your regular income accounts would be 
children of ":real" . Likewise your "pictures" asset account (I take it 
that this is a mutual fund investing in "unfungible assets" like 
artworks) you have a "basis" account for what you paid for your shares 
and a sibling account for "estimated unrealized gain"


You would enter an adjustment at year end, quarter end, etc. that debits 
this asset account (unrealized gains) and credits the unrealized income. 
BTW, for historical reasons these adjustment known as "journal 
transactions". You might be doing this following receipt of a statement 
form the manager of this fund.


Michael D Novack

PS: If this ISN'T what you are trying to do, say so, but please note 
that I might not get back to answering for a couple days. About to be 
tied up in a bunch of board meetings, committee meetings, etc. one after 
the other. That's what happens when you retire, they draft you for 
things like being on boards, committees, etc. and sometimes you get a 
bunch of meetings back to back.




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