The Point of Conversion
The Point of Conversion is the moment that the currency transaction occurs. It is this moment when the actual value of the currency exchange is determined. IMS believes that its clients should know when the transaction occurs and what additional fees and costs have been applied to their transaction.
At IMS, we are dedicated to providing the best International Payment Systems available along with our Exclusive Reporting system that finally brings 100% true accounting to Global Currency Payment market that still has no real standard of reporting.
Here is an Example showing why common Currency Transaction is Un-secure:
One day a business associate called the founders of IMS because he had a problem. $50,000 dollars had disappeared from his bank account. He wanted help to find his missing $50,000.
What happened. He had requested a wired transfer of $1,000,000 from his US bank account to a Bank account in London. Without his instruction, the bank had converted the $1,000,000 into English Pounds. The problem was that this account was for US dollars and so the London bank refused the transfer and sent it back. His US bank account then converted the Pounds back to dollars and redeposited his money back into his US account. However only $950,000 arrived in the account.
When he asked the bank what happened, they had told him that because of market fluctuations(i.e. the value of the dollar went down), $50,000 dollar had been lost. This would have made sense, however, the market had actually shown a 5% gain.
The bank management had no accounting for why the $50,000 really disappeared. After extensive interviewing of the multiple layers of bank management and traders involved, IMS uncovered that the bank had used there own currency conversion prices which were in there favor. IMS estimates that some layer or layers of the bank possibly gained as much as $100,000 from this transaction error.
One of the reasons that no money was returned was that the friend’s banker did not have an accounting of what had transpired. Because of the multiple layers involved in the transaction.
These type of situations are not unique. It happens everyday in nearly every transaction. See the wall street journal report 10-24-2013 and in September 2014 on Global Payments Fraud. It is inherent in the process due to multiple layers of non-transparency and the nature of the system. In most cases your banking relationship will not prevent this from happening to you. We at IMS believe the accounting of Currency Conversion needs to change. Our founder was motivated to do something about this. IMS now has the worlds best, state of the art International Payment system. Coupled with our Exclusive POC report (Point of Conversion), for the first time, you are secure in knowing the precise value of your currency and the cost of the exchange.
Use on the Cambridge Exchange
The IMS © System of POC was tested and performed flawlessly on the FXCM Cambridge Platform in 2013 using EZ-Trade user interface. A record of each deal a client created is recorded in our database. With the search criteria available in ‘Account Status & Reports’ a client can review all their account activity and create corresponding reports anytime they require the information.
By accessing the following categories from the drop-down menus, which include:
‘Payment History’, ‘Settlement History’, ‘Deal History’, ‘Forward History’, ‘Account Balances’ and ‘Today’s Trades’, a client can select the activities that will assist them in sorting and organizing key information.
For each search a client can add as much or as little information as they prefer, the more detail they provide gives them the opportunity to create customized reports for themselves and their team. These results are immediately displayed for their review or use the icons to print or export the results to an excel file which can then be used with their own accounting software.
Cambridge Exchange 2013 Beta Testing
Search and view historical account activity for all your accounts by a specific date range, deal, reference ID or beneficiary
Select and download account history which you export to an excel file or print
Provides the client with any additional resources they might need. (Resource Center Dropdown Menu from Dashboard Screenshot)
Basic Principals Moving Forward
Foreign currency (FX) is treated as personal property for US tax purposes.
As such, disposition of FX is subject to the general realization principles.
Thus, when FX is acquired, its basis is the cost.
When the FX is disposed of, the resulting gain or loss equals the amount realized minus basis.
Currency transactions with the taxpayer’s functional currency are generally not taxable events. For example, use of functional currency to purchase property denominated in functional currency does not result in FX gain or loss.
Thus, it is important to determine what is the taxpayer’s functional currency.
The taxpayer’s functional currency is determined by reference to either the taxpayer itself or the taxpayer’s identifiable separate business operation entitled “qualified business operation (“QBU”).
Each QBU of the taxpayer has its own functional currency.
The USD is the functional currency of a US taxpayer, or of the taxpayer’s QBU, if its activities are mostly conducted in USD.
Any effectively connected income to a US trade or business of a foreign taxpayer is generally treated as a separate QBU with the USD as its functional currency.
Taxpayers can generally elect to treat the USD as their functional currency.
Functional currency is treated as a “method of accounting.”
Books and Recording
A crucial factor in the functional currency determination is the books and records.
It is accepted that a QBU is deemed to maintain its books and records in the currency of the “economic environment” in which a significant part of its activities is conducted.
A QBU’s economic environment is determined under a facts and circumstances test.