Translation adjustment:it is the most common method used and is applied when the local currency is the foreign entity’s functional currency. The subsidiary statement must be translated from its local currency to the parents’ functional currency. To translate the financial statements, the company will use the current rate, which is the exchange rate on
Requirement 1
preparation of proof of the transaction adjustment.
Translation adjustment: it is the most common method used and is applied when the local currency is the foreign entity’s functional currency. The subsidiary statement must be translated from its local currency to the parents’ functional currency. To translate the financial statements, the company will use the current rate, which is the exchange rate on balance sheet date, to convert the local currency. Because revenues and expenses are assumed to occur uniformly over the period, revenues and expenses on the income statement are translated using the average rate for the reporting period. Any translation adjustment that occurs is a component of comprehensive income. The method used to translate financial statement from the local currency to functional currency is called current rate method.
Requirement 2
where is the translation adjustment reported on PC consolidated statement and its foreign subsidiary.
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Chapter 12 Solutions
ADVANCED FIN. ACCT.(LL)-W/CONNECT
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Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning