Currency translation methods for consolidating financial statements
In addition, businesses frequently prepare financial statements quarterly or whenever necessary, which are referred to as interim statements.
The Financial Accounting Standards Board, in its Statements of Financial Accounting Concepts, asserted that financial reporting includes not only financial statements but also other means of communicating information that relates, directly or indirectly, to the information provided by the accounting system.
There are five important rules an accountant must follow when consolidating.
First, the accounting must eliminate all of the subsidiary's shareholders equity accounts, such as common stock and retained earnings.
Furthermore, financial statements report the financial position or financial status of a business or an individual as well as financial changes at a particular time or during a period of time.
However, I have explained particularly this issue in my article on Accounting for prepayments in foreign currency under IFRS together with the numerical example, so please read there if interested.
Currently, this is a little bit unclear in the standards.
The standard IAS 12 Income Taxes indirectly indicates that the deferred tax assets and liabilities are , because it notes that the exchange rate differences on deferred foreign tax liabilities or assets are recognized in the statement of comprehensive income (par. Investments in preference shares are another item that requires our careful judgment. In fact, both IAS 39 and IFRS 9 say that investments in equity instruments are non-monetary items.
On the other hand, if terms of the preference shares lead to the shares being classified as a financial liability, then it should be treated as a monetary item.
For example, the share that DOES specify mandatory redemption by the issuer at some future date would represent a liability.
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This information is also reported on the income statement of the parent company.