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Consolidation

5 July 2010 1,905 views 3 Comments
Dear all

I have a doubt about the consolidation of fully owned subsidiary.
While consolidat the financial statements, which rate of exchange we should apply :
i think, for income statement, the rate should be average rate.for balance sheet items, the closing rate for monetory items and for non-monetory items the historical spot rate.
further,what rate, ie buying or selling rate of exchange, should be applied
thank you
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3 Comments »

  • ifrslist
    ifrslist said:

    [New Post] Consolidation – http://www.ifrslist.com/2010/07/consolid...
    via Twitoaster

    # 5 July 2010 at 7:32 pm
  • patriciawalters said:

    Translation of the financial statements of a subsidiary in consolidation is covered in IAS 21, The Effects of Changes in Foreign Exchange Rates. Which rates to use for which financial statements items is clearly explained in that standard.

    There are two issues that the standard addresses. First is translation of financial statement information into a subsidiaries functional currency, which may not be the currency in which it keeps its books and records. The second issue comes into play when a subsidiaries functional currency is not the presentation currency of the consolidated financial statements.

    The bottom line is that choice of exchange rates in either of the above situations is not a free choice. The standard tells you what rates to use.

    Regards
    Patricia

    # 13 July 2010 at 8:43 pm
  • riyer0018 said:

    Scenario 1: The functional currency of the Parent and Subsidiary are the same

    No translation is required to be made. However, if the accounts of the subsidiary are maintained in a currency that is different from the functional currency, accounts are required to be reconstructed in functional currency terms.

    Scenario 2: The functional currency of the Parent and Subsidiary are not the same

    Translation is required to be made. Followed paragraph 39 of IAS 21 to translate from the functional currency of the subsidiary to the presentation currency of the Parent Company.

    # 16 August 2010 at 8:13 am

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