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On 1 June 20X2 Saint (parent ) lent Albans(subsidiary) $1,400. The liability is recorded at the historic rate within the non-current liabilities of Albans(subsidiary) at (5460 which is 1400*3.9 where 3.9 is the historic rate)
In the solution they have* adjusted this in the wn2 by calculating the Exchange loss on loan.
WHy would they include this in wn2 (net assets ofsubsidiary).
Thank uAssume parent trades in $ and the sub in dinars.
If parent lends sub $ this will be a foreign transaction in the sub’s books and will give rise to an XD in the sub’s books. This would affect net assets of subsidiary.
If parent lends sub money in dinars this will be a foreign transaction in the parent’s books and will give rise to an XD in the parent’s books.
Don’t forget that you won’t be asked to do a full consolidation.
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