CO129-489 - Governor Sir Stubbs & Sir Clementi - 1925 [8-12] — Page 197

!

being kept in dollars there are of necessity many

transactions which result in either a profit or

201

loes on exchange, e.g., Advances, Deposits,

Family Remittances, Passage Refunds, etc. example, an advance of £100 made by the Crown Agents to an officer of Hongkong in England, exchange is 2/6 to £1 sterling (equalling $800), is repaid in Hongkong at a later date when the exchange has fallen to 2/- to £1 sterling (equal- ling $1,000). The resulting profit of $200 in such a case must I think be regarded as revenue

due to a profit on exchange.

For

when

On the other hand there are certain sterling investments and funds which are held by the Crown Agents on behalf of the Government of Hongkong and which it is necessary to convert into dollars periodically for the sole purpose of record in the accounts. I am inclined to agree that any in-

creases or decreases in such conversions are not rightly revenue or expenditure, but with the proviso,that when any actual profit or loss results from the realisation of such investments or funds, any such profit or loss should be carried

to revenue or expenditure in accordance with

Colonial Regulation 309.

I think, therefore, that in the former case

it is correct to carry all profits or losses on exchange to an "Exchange Account", as was done up to the year 1922, the balance of which at the close of the year is carried to revenue or expenditure as the circumstances may require. but that in the latter case the increases or decreases in the dollar value of sterling invest- ments or sterling funds held by the Crown Agents should continue to be carried to the "Adjustment

of

of Exchange Account" which was introduced into

the accounts in the year 1922.

I am of the opinion, however, that the

practice of carrying the balance of this Adjust-

ment of Exchange Account at the close of the

year direct to the Surplus and Deficit Account,

in contravention of Colonial Regulation 345.

cannot be sanctioned, and I gather from your

minute that you would be averse from approaching

the War Office in order to obtain exemption from

the Military Contribution in the event of the

balance of this account being carried to revenue.

I suggest, therefore, that, as an alternative,

the Adjustment of Exchange Account might be

regarded as a fund in which the increases or

decreases in dollar values would be held in

suspense from year to year, thus allowing the

increases of one year to be set off by the

decreases in another year and vice versa, and

that the balance of this account should be

carried forward from year to year, with the

result that the balance at the close of each

year would appear as an asset or a liability, as

the case may be, in the Balance Sheet of the

Colony for that year.

Such a solution would, I think, meet the

views of the Governor, would avoid any breach of

Colonial Regulations, and would also obviate the

necessity for referring the matter to the War

Office.

7

20.11.23-

2 so proud

AB

At once

12 Algo