The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected.Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.The interests of financial statement users are better served by alternative presentations of foreign currency denominated accounts rather than by consolidation This paper provides a comprehensive review of the primary requirements and application of International Financial Reporting Standards (IFRS), which are relevant to the consolidation of foreign subsidiariesonsolidated company.In addition to this, we shall also discuss the effects of changes in foreign exchange rates, strategies used by foreign parent companies in reporting foreign currency transactions in the functional currency and the translation of a foreign operation.arent-subsidiary relationship emanating from stock acquisition where the parent is the acquiring company and the subsidiary is the acquired company.To start with, we have the concept of statutory merger, where a business combination results in the liquidation of the acquired company’s assets and the survival of the purchasing company.Let’s be more practical today and learn some advanced accounting techniques.For solving this issue, International financial reporting standards have given some guidelines. Pre-acquisition equity will be translated at historical rate Subsidiary company's pre-acquisition equity will be translated at historical rate. The foreign financial statements must be recast into US GAAP and the foreign currency financial statements must be translated into US dollars. No additional work is needed if the functional currency is the U. Suppose, shares capital of Y company before acquisition was Pre-acquisition rate was 1$ = RS. Like USA, there are many country's GAAP follow such rules. Re-measurement of foreign currency financial statements into a subsidiary’s functional currency The remeasurement of the foreign entity’s statements into the functional currency of the entity After re-measurement, the statements must then be translated if the functional currency is not the U.
Balance sheet accounts are usually revalued at the month end rate (including revaluation of prior period balances).Recently, I am in charge for preparation of consolidation accounts with other companies which using different currencies. Is it same treatment as Trade Receivables - unrealised gain/loss? The answer is not as straightforward as most of us would like.You have to first determine the functional currency of each foreign operation that you are consolidating.If you don’t like reading, you can skip to the end of this article and watch my video.If you’d like to revise a theory first, then please read my summary of IFRS 3 Business Combinations and IFRS 10 Consolidated Financial Statements, both of them contain video in the end.