Recording consolidating adjustments
This is different from the situation when they are in the UK’s books. The UK parent acquired a German subsidiary on 3 January 2015 when the subsidiary’s retained earnings amounted to EUR 4 000.On 30 November 2016, the UK parent purchased goods from the German subsidiary for EUR 5 000.
The reason is that it’s easier and logical to fix the rate at the date of the acquisition when the goodwill and/or non-controlling interest are calculated.It stays there and it will become a part of a consolidated profit or loss, because it reflects the foreign exchange exposure resulting from foreign trade. On the consolidation, the exchange rate gain of EUR 50 recorded in the German financial statements in profit or loss (together with the difference that arises on translation of the EUR 50 by the average rate).With regard to profit or loss items, or intragroup sales – you should translate them at the date of a transaction if practical.If you take action today and subscribe to the IFRS Kit, you’ll get it at discount! Please note that the above table applies when neither functional nor presentation currency are that of a hyperinflationary economy.Actual rates are the rates at the date of the individual transactions, but you can use the average rate for the year if the actual rates do not differ too much.