3 ms·

I had such case too, the solution is simple: round in favor of the bank / financial institution you are working for

by rvnx 3y ago

onetimeuse92304 3y ago
No, it does not work this way. Any good accountant will see a different in values, even smallest one, as a sign of an incorrect calculation. Does not matter which way it goes, they will feel compelled to figure out who is wrong. At least a good accountant will.
- rvnx 3y ago
  There is no accounting error; let's say customer has purchased / used a service for 1.433 USD. You issue an invoice for 1.44 USD (aka, amount due), then the 1.44 USD is used as a basis for accounting and is all consistent. Then, if you are a nice company and the situation applies in your case, you may issue a credit in favor of the customer for 1.44 USD - 1.433 USD that will be used as a discount on a future invoice The best part is that the moment where you decide to issue the credit invoice or not, is the perfect moment to track the rounding errors and even keep a very detailed journal of the entries (e.g. for auditors).
  - marcosdumay 3y ago
    You added 10 of those items as inventory with a total value of 14.33, then you sold each individually as a total value of 14.40. After that transaction, your inventory account has -0.07 on it, but there aren't any items at all there.
    - hef19898 3y ago
      From experience, those differences surface during stock taking. Amd most companies are really bad at that. And if they surfacey they are corrected by inventors adjustments (in unit of measure, not value, which is a differwnt can of worms). As long as those adjustments aren't to extreme, nobody really cares. A good accountant so will sooner or later investigate those rounding errors, as they will show up somewhere ultimately. And a general policy of rounding in one direction is the last thing you want an auditor to find.
      - eternityforest 3y ago
        So accountants are like number detectives doing what's essentially debugging work just like a coder would?
        marcosdumay 3y ago
        They design the system, detect the failures, explain and correct them. So, their work even is more like programing than your comment implies.
  - meekaaku 3y ago
    One can use more than 2 decimal places for rates, but final invoicing has to be two decimal places (atleast in most countries). Banks/tax authorities dont carry anything beyond 2 decimal. Eg: fuel is usually priced 3 decimal, so 4 gallons x 25.5444 usd/gallon gives = $102.1776 to 4 dp, but will be billed as $102.18
- bux93 3y ago
  Any rounding discrepancies simply get posted to a rounding-error account. For example, oracle's ledger will complain if there is rounding and no rounding-error account to post to. https://support.oracle.com/knowledge/Oracle%20Cloud/2411363_1.html https://support.oracle.com/knowledge/Oracle%20Cloud/2411363_...
tonfreed 3y ago
I've worked in banking. I assure you, I would have had a million bugs filed on that before it even hit production.
seanhunter 3y ago
That is absolutely not how it works. Rounding is exactly specified in the underlying contract always and you need to implement the correct rounding. For example, here is the rounding table for compounding calculations in the ISDA definitions (these are very standard for a wide range of contracts, but this particular table is for various overnight swap rates used in interest rate derivatives)[1]. [1] https://globalmarkets.cib.bnpparibas/app/uploads/sites/4/2021/11/isda-2021-definitions-compounding-averaging-matrix.pdf https://globalmarkets.cib.bnpparibas/app/uploads/sites/4/202...
- cornstalks 3y ago
  And how do they round ties? Does 0.00005% round to 0.0001%? Is tie breaking usually included in such contracts?
  - RandomLensman 3y ago
    For these benchmarks, yes, that is defined. Where issues could come in is when these things are multiplied with a bunch of other numbers (each number with defined rounding but not after each operation) and then have some defined rounding at the end. There different computer numerics could in give slightly different results, but those can easily be resolved on settlement (for small stuff that stays well within the back offices - at least that is how I remember it). Also, not totally unusual for one or both participants to forget about some rounding they might have agreed bilaterally if it was some one off etc.
- prometheus76 3y ago
  Interesting side note:ASME also has a standard for rounding on engineering drawings. A few years back I had to build a custom function in Excel to match the standard, because our calcs weren't matching the customer's calcs.
yyyk 3y ago
Heh. But usually it's the other way around unless they remembered to specify it the right way. Forgiving $0.01*N customers is cheaper than dealing with an irate customer.

I had such case too, the solution is simple: round in favor of the bank / financial institution you are working for

by rvnx 3y ago

I had such case too, the solution is simple: round in favor of the bank / financial institution you are working for

No, it does not work this way. Any good accountant will see a different in values, even smallest one, as a sign of an incorrect calculation. Does not matter which way it goes, they will feel compelled to figure out who is wrong. At least a good accountant will.

rvnx 3y ago
There is no accounting error; let's say customer has purchased / used a service for 1.433 USD. You issue an invoice for 1.44 USD (aka, amount due), then the 1.44 USD is used as a basis for accounting and is all consistent. Then, if you are a nice company and the situation applies in your case, you may issue a credit in favor of the customer for 1.44 USD - 1.433 USD that will be used as a discount on a future invoice The best part is that the moment where you decide to issue the credit invoice or not, is the perfect moment to track the rounding errors and even keep a very detailed journal of the entries (e.g. for auditors).
- marcosdumay 3y ago
  You added 10 of those items as inventory with a total value of 14.33, then you sold each individually as a total value of 14.40. After that transaction, your inventory account has -0.07 on it, but there aren't any items at all there.
  - hef19898 3y ago
    From experience, those differences surface during stock taking. Amd most companies are really bad at that. And if they surfacey they are corrected by inventors adjustments (in unit of measure, not value, which is a differwnt can of worms). As long as those adjustments aren't to extreme, nobody really cares. A good accountant so will sooner or later investigate those rounding errors, as they will show up somewhere ultimately. And a general policy of rounding in one direction is the last thing you want an auditor to find.
    - eternityforest 3y ago
      So accountants are like number detectives doing what's essentially debugging work just like a coder would?
      - marcosdumay 3y ago
        They design the system, detect the failures, explain and correct them. So, their work even is more like programing than your comment implies.
- meekaaku 3y ago
  One can use more than 2 decimal places for rates, but final invoicing has to be two decimal places (atleast in most countries). Banks/tax authorities dont carry anything beyond 2 decimal. Eg: fuel is usually priced 3 decimal, so 4 gallons x 25.5444 usd/gallon gives = $102.1776 to 4 dp, but will be billed as $102.18
bux93 3y ago
Any rounding discrepancies simply get posted to a rounding-error account. For example, oracle's ledger will complain if there is rounding and no rounding-error account to post to. https://support.oracle.com/knowledge/Oracle%20Cloud/2411363_1.html https://support.oracle.com/knowledge/Oracle%20Cloud/2411363_...

tonfreed 3y ago

I've worked in banking. I assure you, I would have had a million bugs filed on that before it even hit production.

seanhunter 3y ago

That is absolutely not how it works. Rounding is exactly specified in the underlying contract always and you need to implement the correct rounding. For example, here is the rounding table for compounding calculations in the ISDA definitions (these are very standard for a wide range of contracts, but this particular table is for various overnight swap rates used in interest rate derivatives)[1]. [1] https://globalmarkets.cib.bnpparibas/app/uploads/sites/4/2021/11/isda-2021-definitions-compounding-averaging-matrix.pdf https://globalmarkets.cib.bnpparibas/app/uploads/sites/4/202...

cornstalks 3y ago
And how do they round ties? Does 0.00005% round to 0.0001%? Is tie breaking usually included in such contracts?
- RandomLensman 3y ago
  For these benchmarks, yes, that is defined. Where issues could come in is when these things are multiplied with a bunch of other numbers (each number with defined rounding but not after each operation) and then have some defined rounding at the end. There different computer numerics could in give slightly different results, but those can easily be resolved on settlement (for small stuff that stays well within the back offices - at least that is how I remember it). Also, not totally unusual for one or both participants to forget about some rounding they might have agreed bilaterally if it was some one off etc.
prometheus76 3y ago
Interesting side note:ASME also has a standard for rounding on engineering drawings. A few years back I had to build a custom function in Excel to match the standard, because our calcs weren't matching the customer's calcs.

yyyk 3y ago

Heh. But usually it's the other way around unless they remembered to specify it the right way. Forgiving $0.01*N customers is cheaper than dealing with an irate customer.