Consolidating foreign currency subsidiaries Stolen cam pics
FRS 102 does acknowledge in paragraph 30.17 that an entity may present its financial statement in any currency (or currencies).
Example – presentation currency Top Co Limited is the parent of a number of subsidiaries which operate throughout Germany, Spain and France, however the majority of the group’s turnover and profits are generated in the United Kingdom.
For clarity, paragraph 30.3 outlines some important factors when considering the functional currency of an entity, it says: ‘The primary economic environment in which an entity operates is normally the one in which it primarily generates and expends cash.
Therefore, the following are the most important factors an entity considers in determining its functional currency: In addition, the currency in which funds from financing activities are generated will also have a bearing on an entity’s functional currency as well as the currency in which receipts from operating activities (the day-to-day, revenue-producing activities of the entity) are usually retained.
Example – foreign subsidiary which is not wholly-owned Top Co Limited owns 80% of Foreign Co Inc and has accumulated exchange differences which have been recognised in other comprehensive income.
The cost of the chemicals is €180,000 and the spot rate on the date of the transaction is £1 = €1.45.
The company does not have credit facilities with this supplier.
This applies whether or not the transaction is covered by a forward foreign currency contract (which is different than the choice offered in SSAP 20 at paragraph 46 where an entity can record the transaction at the rate of exchange on the date of the transaction or the rate specified in the contract).
Example – purchase of goods from an overseas supplier A company based in the UK buys a batch of chemicals from its supplier based in Austria.
Any fair value adjustments to the carrying amount of assets and liabilities arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation.