Issues with transactions in foreign currencies

[gbfabiani]

Hi Mark ,

When I manually record a purchase of an investment denominated in a foreign currency ( In my situation Eur is the local one) I find occasional differences between the value in local currency of this purchase of an investment denominated in a different currency and the value of the cash , always in local currency.

As this happens randomly, it took me a while to create a wrong booking on purpose .

It looks like the rate applied to the transaction is the one in the currency table at the moment I book this transaction, but if after that moment the rate in the currency table is updated/modified , my transaction in local currency is updated too, while cash remains unchanged.

I understand that the closing rate is best in reflecting the value of the transaction in a particular day, but in the moment the value of the transaction is modified (just a bit is enough) , and the cash is not, if I delete the investment transaction the cash remains unchanged (non matching amounts) , or if I modify one row in the investment, the old one in the cash remains unchanged, and a new line is added . Eventually, i don't balance the movements anymore.

I just add screens where you see a trial booking made with big numbers and with 1 Eur= 1,1 USD

Fund example.docx

(179.54 KiB) Downloaded 321 times

, than a change in the currency table from 1,1 to 1,15

Fund example 2.docx

(190.4 KiB) Downloaded 292 times

and as a consequence I see a change in the value of the investment transaction , while the cash spent remains the same. It is worth to see that after the modification in the currency price, the original transaction changes its Euro value , but the detail of the USD booking still shows the original exchange rate (1,1 in my example) . If I try to reconcile 100000 shares time 10,50 USD / 1,1 (as shown) , it will have 954545,45 ( the original value who is still booked in the cash account ) but at the same time the data register will show 913043,48 , and so will do the performance report and so on .

Hope I described my doubts effectively , regards
giovanni

[Mark]

Hi giovanni,

This is the expected behavior when you're not using transaction specific exchange rates. The cash is debited/credited at the time you record the transaction. The amount of cash is determined by the exchange rate when you're going across currencies. If you use a transaction specific exchange rate, it will use that rate, otherwise it will use your global rate. If your global rate later changes, FM does not go back and update the cash side of any such transactions that used that global rate. (Maybe the global rate changed from the time you bought to later in the day for example).

In this case the best thing is to specify the exchange rate at the time of the transaction, by checking that option to use a transaction specific exchange rate. This way, your cash amount is determined by this transaction specific exchange rate, and not the global rate. That transaction specific exchange rate edit box will default to the current rate, so you can use that if you want. If you later want to change the transaction specific exchange rate for some reason, that would update the amount of cash, unlike changing the global exchange rate.

[gbfabiani]

Hi Mark ,

I understand your points.

However, the transaction specific exchange rate is not an available option at the time the transaction occurs while a new investment is created. In fact, the differences I had are usually happening on the first transaction I booked .....
So , at least, this option should be added to the new investment mask.

Considering anyway how "dangerous" are the consequences of these differences in term of edit/delete a transaction later, and accepting that "FM does not go back and update the cash side of any such transactions that used that global rate" , my suggestion would be that when the global rate is used ( no specific exchange used) the program will consider the applied global rate as "specific" anyway, and thick mark the box.

This way one will remain free to accept the rate ( like today we do not specifying it) , or to edit at a later stage , but under no circumstances cash and investment transactions will be different.

The effects of a rate change during the day of the transaction will remain clearly effective, as at the end of the day the portfolio will anyway be valued at closing price + closing rate, isn't it ?

regards
giovanni

[Mark]

Hi giovanni,

I agree it would be good to add an option to specify a transaction specific exchange rate in the "New Investment" dialog. For now, I'd suggest creating the new investment with 0 shares, and then using the "Buy/Sell" dialog, so you can assign a transaction specific exchange rate.

FM will modify cash if the global exchange rate is still at the same value when you initially recorded the buy transaction. The case where you record a buy transaction without a transaction specific exchange rate, change the global rate, and then modify the transaction will result in the cash side not being modified. If you always check the option to use a transaction specific exchange rate, this will never be an issue.

Yes, the global exchange rate will always be used to determine the market value.

[Djobydjoba]

Hello,

my suggestion would be that when the global rate is used ( no specific exchange used) the program will consider the applied global rate as "specific" anyway, and thick mark the box.

I support the idea. My fear too is an accidental change of the global rate (because of a problem with the downloaded data, for example), that would change the values for the recorded transactions. So I always tick the box to make the exchange rate specific for the transactions in foreign currency.

[Mark]

Okay, thanks for the feedback. Maybe we could leave the available options as they are now, but just default this option ON, and fill in the value with the current global rate. That way it makes it easier to always use a transaction specific exchange rate.

[Djobydjoba]

Hi Mark,

From my point of view it would be an improvement.

Regards.