Consolidated vs consolidating balance sheet arab dating london
If the equity balances result from income and expenses presented in OCI (e.g.
revaluation surplus), then it’s more appropriate to translate them at the rate at the transaction date.
If you translate the financial statements using different foreign exchange rates, then the balance sheet would not balance (i.e. Therefore, CTD, or currency translation difference arises – it’s a and shows the difference from translating the financial statements in the presentation currency.
If you translate the financial statements to a presentation currency for the purpose of consolidation, you need to be careful with certain items.
You still need to eliminate the share capital and pre-acquisition profits of a subsidiary with parent’s investment in a subsidiary (plus recognize any goodwill and/or non-controlling interest). We need to follow the rules in IAS 21 The Effects of Changes in Foreign Exchange Rates for translating the financial statements to a presentation currency.
You still need to eliminate intragroup balances and transactions, including unrealized profits on intragroup sales and any dividends paid by a subsidiary to a parent. Just a small note: please, do not mess up a functional currency with a presentation currency. It’s a full IFRS learning package with more than 40 hours of private video tutorials, more than 140 IFRS case studies solved in Excel, more than 180 pages of handouts and many bonuses included. Its functional currency is in most cases GBP (exceptions exist), but this company can decide to prepare its financial statements in EUR or USD – they will be the presentation currencies.
Although the parent business and its subsidiaries may operate as individual, stand-alone businesses, when financial statements are consolidated, the parent company and its subsidiaries are treated as single entity.
Consolidated financial statements therefore give investors, regulators, or customers a better overview of the entire entity’s overall financial health.
If the subsidiary is based in another country or operates using a different currency, it is important to translate their financial statements into the currency of the parent company.The exchange rates were 0,8234 GBP/EUR on 10 September 2010, and 0,78 GBP/EUR on 3 January 2015.When the UK parent translates German financial statements to GBP for the consolidation purposes, the share capital will be translated at the historical rate applicable on 3 January 2015.Therefore, the share capital amounts to GBP 78 000, rather than GBP 82 340.If the equity balances result from the transactions with shareholders (for example, share premium), then it’s appropriate to apply the historical rate consistently with the rate applied for the share capital.