Consolidation

Producing consolidated group accounts that include foreign currency subsidiaries with translation of assets and liabilities and P&L accounts at different exchange rates – can be quite complex.

Consolidating Group Accounts

Under the Generally Accepted Accounting Principles (GAAP) standard Foreign currency consolidation is performed using the Current Rate Method. This involves:

Translation of all assets and liabilities of the foreign subsidiary are done at the point exchange rate prevailing on the balance sheet date.
Whereas revenues and expenses in the income statement are translated using the average exchange rate for the period.
Finally, any resulting translation gains or losses are reported in the consolidated financial statements as a separate component of equity.