Consolidating foreign subsidiaries ifrs
Functional currency issues SFAS 52 introduced the concept of functional currency, defined as "the currency of the primary economic environment in which the entity operates; normally, that is, the currency of the environment in which an entity primarily generates and expends cash." For example Z company's subsidiary Y company deals with 5 countries. All these Transactions are often translated at the spot rate, i.e., the rate of exchange between the transaction currency and the functional currency on the date of the transaction.The consolidation of foreign subsidiaries includes the preparation and presentation of consolidated financial statements for a group of entities under the control of a foreign parent 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.
Here’s the question: Mommy Corp has owned 80% shares of Baby Ltd since Baby’s incorporation.
Below there are statements of financial positions of both Mommy and Baby at 31 December 20X4.
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.
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