@@ -45,51 +45,55 @@ currency other than the organization's functional currency.
If this representation system is chosen, the problem occurs in situations
where an entire sequence of related transactions -- from accrual to payment
-- must occur in a currency other than the organization's functional
currency. The easiest example is a traveler who lives in Europe books a
flight in EUR, and seeks to be reimbursed in EUR, but the organization's
functional currency is USD.
In this case, again, the entire EUR-side of the transaction can be done "off
book", and the balancing amount at reimbursement time can be recorded simply
as a currency conversion expense (or income). This again has the problem
that the detail of what actually happened is never recorded in the books.
The suggested way of solving this problem is to take the amount of EUR that
was fixated at a specific USD conversion rate at the time of accrual, and
then consider it to be "sold" at whatever the available exchange rate that
occurs. (Again, Conservancy solves this with Ledger-CLI and
[a mix of the fixed lot prices and fixated cost feature](http://www.ledger-cli.org/3.0/doc/ledger3.html#Fixing-Lot-Prices)).
### Simplicity In Functional Currency
If an non-profit organization has a single functional currency, then most
aspects of the system, such as [[reporting|GeneratingReports]], can (and, in
fact, should) be done only in the functional currency.
---
## A "Multi-Native Currency" Organization
Multi-currency support is more complicated if an organization considers more
than one currency to be its native currency, which means that
[[reports|GeneratingReports]] must handle multiple currency.
FIXME: It would be useful if someone who has run an organization that has
more than one functional currency could describe the use cases on this issue.
## Choosing an Exchange Rate
Regarding exchange rates, the
[USA IRS has no official policy on exchange rates](http://www.irs.gov/Individuals/International-Taxpayers/Yearly-Average-Currency-Exchange-Rates),
stating:
> The Internal Revenue Service has no official exchange rate. Generally, it
> accepts any posted exchange rate that is used consistently.
> When valuing currency of a foreign country that uses multiple exchange
> rates, use the rate that applies to your specific facts and circumstances.
> For example, if you have a single transaction such as the sale of a
> business that occurred on a single day, use the exchange rate for that day.
> However, if you receive income evenly throughout the tax year, you may
> translate the foreign currency to U.S. dollars using the yearly average
> currency exchange rate for the tax year.
Given this IRS recommendation, it may make sense for the system to allow a
pluggable exchange rate system based on local policies of the organization.