Process consolidating foreign currency subsidiaries
ASC 830 establishes these steps: Foreign currency translation is more than a simple mechanical exercise.
A thorough understanding of ASC 830 or IAS 21 is required, and many aspects of this process require significant management judgment, especially as it relates to determining the functional currency of the subsidiary.
The consolidated financial statements give an overview of how well the entire corporation is being managed and are useful in valuing the company as a whole.
The shares owned by outsiders are shown on the balance sheet as an item.
However, in addition, consolidated balance sheets are prepared.
Therefore, because the subsidiary's stakeholders are more interested in the subsidiary’s individual financial statements than in the consolidated statements, company annual reports often include both the consolidated statements and the subsidiary statements, but never the parent's financial statements alone. There are 16 references cited in this article, which can be found at the bottom of the page. He has over 40 years of experience in Business & Finance.A subsidiary is a company that is controlled by its parent company.The subsidiary acts and operates as its own entity, but it is still connected to the larger company.