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when we do the group retained earnings calc…..there are 2 methods used (assuming no impairment)
1…100% group r/e ($)
+% of post acq mov (in $)using closing rate
retranslating the cost of investment2.100% group r/e
+ % of post acq mov (in $) using avg rate
the answer frm both method differs…so will the sofp tally…marks will be given fr either method ryt ?pls help ….thank youThe final calculation to determine the exchange rate gain or loss (Opening net assets at opening rate + profit for the year as translated – closing net assets at closing rate = exchange rate gain or loss
Profit for the year is arrived at by translating this year’s subsidiary income statement at average rate (except dividends which should be translated at actual rate)
The brought forward net assets are given in the question (closing net assets – this year’s retained earnings)
The carry forward net assets are given in the question
So four different rates are used (opening rate for opening net assets, closing rate for closing net assets, actual rate for any subsidiary dividends taken from retained earnings and average rate for the income statement)
Does that answer it for you?
actually i dint mean to ask about the forex translation reserve….i meant the csofp…the group retained earnings and nci working …there are 2 ways 2 calculate it….
as per a few texts…
…………………………………………………………………………
method 1.in the nci working…they do ( value of nci at acq translated at closing rate + nci% of post acq movement at avg rate )= carring value of nci
and group retained earnings = 100% parent retained earning + parent% of post acq movement translated at avg rate
or
method 2 .
nci working =value of nci at acq translated at closing rate+ nci % of post acq movement translated at closing rategroup retained earnings working = 100% parent retained earnings + parents % of post acq movement translated at closing rate …+/- gain /loss on retranslating the cost of investment of subsidiary
…………………………………………………………………….the amounts that i get from the nci and group retained earnings will be different in both the methods…will the marks be deducted if the amounts are not what the markers want….
but at the end when i prepare the consolidated sofp…using the amount i got from either method of nci and group retained earnings ..the csofp does tally….
by post acquisition movement…i meant (net assets at reporting date – net assets at acq)
i hope you understood what my doubt is ..:)
thank you
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