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IAS 21: Foreign Operation Translation Example

This document provides an example of translating a foreign subsidiary's financial statements into the parent company's currency according to IAS 21. It shows the standalone financial statements of an entity and its foreign subsidiary in their local currencies, along with the consolidated financial statements of the parent and subsidiary translated to the parent's currency. The translation resulted in a currency translation adjustment that is reported in other comprehensive income.

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184 views4 pages

IAS 21: Foreign Operation Translation Example

This document provides an example of translating a foreign subsidiary's financial statements into the parent company's currency according to IAS 21. It shows the standalone financial statements of an entity and its foreign subsidiary in their local currencies, along with the consolidated financial statements of the parent and subsidiary translated to the parent's currency. The translation resulted in a currency translation adjustment that is reported in other comprehensive income.

Uploaded by

devanand bhaw
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as XLSX, PDF, TXT or read online on Scribd

last updated: 11/8/2018

IAS 21 example: basic translation of a foreign operation

Below are calculations accompanying the example available on IFRScommunity.com under direct link below:

https://ifrscommunity.com/knowledge-base/ias-21-effects-of-changes-in-foreign-exchange-rates/#link-ias_21_example_b

Fx rates
1.1 EUR/USD rate at 1 January 20X1
1.2 EUR/USD average rate in 20X1
1.3 EUR/USD rate at 31 December 20X1

Entity X stand-alone

Statement of financial position (USD)

1 Jan 20X1 31 Dec 20X1


Assets 5,000 5,300
Share capital 2,000 2,000
Retained earnings - 300
Total equity 2,000 2,300
Liabilities 3,000 3,000

P/L for year 20X1 (USD)

Revenue 1,000
Expenses (700)
Net income 300

Group A consolidation (EUR)

Statement of financial position (EUR) - 1 January 20X1

Consolidation
Stand-alone adjustments Consolidated
Parent (A) Subsid (X) Group (A+X)
Investment in X 1,818 - (1,818) -
Other assets 7,000 4,545 - 11,545
Total assets 8,818 4,545 (1,818) 11,545
Share capital 3,000 1,818 (1,818) 3,000
Retained earnings - - - -
Total equity 3,000 1,818 (1,818) 3,000
Liabilities 5,818 2,727 - 8,545

Statement of financial position (EUR) - 31 December 20X1

Consolidation
Stand-alone adjustments Consolidated
Parent (A) Subsid (X) Group (A+X)
Investment in X 1,818 - (1,818) -
Other assets 8,000 4,077 12,077
Total assets 9,818 4,077 (1,818) 12,077 thi
Share capital 3,000 1,538 (1,538) 3,000 (2
at
Retained earnings 1,000 231 19 1,250 of
CTA - - (299) (299) (1
Total equity 4,000 1,769 (1,818) 3,951 ave
inc
Liabilities 5,818 2,308 - 8,126

P/L for year 20X1 (EUR)


Consolidation
Stand-alone adjustments Consolidated
Parent (A) Subsid (X) Group (A+X)
Revenue 2,500 833 - 3,333
Expenses (1,500) (583) - (2,083)
Net income 1,000 250 - 1,250
CTA (OCI) - (299) (299)
ect link below:

tes/#link-ias_21_example_basic_translation_foreign_operation_01
this can be split into:
(280) - impact of translation of the opening net assets
at a closing rate of 1.3 that differs from the opening rate
of 1.1.
(19) - impact of translation of net income at the
average exchange rates of 1.2 and the corresponding
increase in the net assets the closing rate of 1.3

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