Consolidating foreign subsidiary example
P&L accounts are often revalued at a midpoint rate for the month.
Investment accounts (like investment in subsidiary) are valued at historical rates (and never revalued).
Some general guidelines: 1) The method for conversion / translation for each subsidiary depends on the status (expense or P&L) role assigned to the subsidiary. 2) Accounts have different conversion rates used in the P&L model.
Please note here that in the above statements of financial position, .
I use it this way because for me it’s easier to verify and identify mistakes, but it’s up to you.
I have described the consolidation procedures and their 3-step process in my previous article with the summary of IFRS 10 Consolidated financial statements, but let me repeat it here and follow these steps: After you make sure that all subsidiary’s assets and liabilities are stated at fair values and all the other conditions are met, you can combine, or add up like items.
It’s very easy when a parent (Mommy) and a subsidiary (Baby) use the same format of the statement of financial position – you just add Mommy’s PPE and Baby’s PPE, Mommy’s cash and Baby’s cash balance, etc.
A good upper level accounting textbook can be invaluable..one used on Amazon.