Chapter 10 - Translation of foreign currency financial statements. In this chapter, these two issues are examined first from a conceptual perspective and second by the manner in which the FASB in the United States has resolved these issues. The chapter concludes with a discussion of IFRS on this topic. | Chapter Ten Translation of Foreign Currency Financial Statements Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Worldwide Consolidated Financial Statements To prepare worldwide consolidated financial statements a U. S. parent must: (1) convert the foreign GAAP financial statements of its foreign operations into . GAAP and (2) translate the financial statements from the foreign currency into . dollars. This conversion and translation process is required whether the foreign operation is a branch, joint venture, majority-owned subsidiary, or affiliate accounted for under the equity method. 10- To prepare worldwide consolidated financial statements a U. S. parent must: (1) convert the foreign GAAP financial statements of its foreign operations into . GAAP and (2) translate the financial statements from the foreign currency into . dollars. This conversion and translation process is required whether the foreign operation is a branch, joint venture, majority-owned subsidiary, or affiliate accounted for under the equity method. Translation Methods: Temporal and Current Rate LO 1 Two major translation methods are currently used: (1) the current rate (closing rate) method and (2) the temporal method. 10- Comparison of temporal and current rate methods Treatments for Translation Adjustment The two major translation methods and the two possible treatments for the translation adjustment give rise to four possible combinations: 10- The two major translation methods and the two possible treatments for the translation adjustment give rise to four possible combinations: Two Translation Combinations Some subs use a . dollar perspective to translation, so most of their transactions are recorded in . dollars using the temporal method. Other subs use the local currency perspective; they operate relatively independent of their . parents and use the current rate method for translation. Translation adjustment . | Chapter Ten Translation of Foreign Currency Financial Statements Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Worldwide Consolidated Financial Statements To prepare worldwide consolidated financial statements a U. S. parent must: (1) convert the foreign GAAP financial statements of its foreign operations into . GAAP and (2) translate the financial statements from the foreign currency into . dollars. This conversion and translation process is required whether the foreign operation is a branch, joint venture, majority-owned subsidiary, or affiliate accounted for under the equity method. 10- To prepare worldwide consolidated financial statements a U. S. parent must: (1) convert the foreign GAAP financial statements of its foreign operations into . GAAP and (2) translate the financial statements from the foreign currency into . dollars. This conversion and translation process is required whether the foreign operation is a .
