Process for Translating Foreign Sub's Results & Calculating Gains or Losses

Hi Sir

Apologies, I have tried to be as clear as I can below, I’m really sorry if parts aren’t very clear and would be happy to try to rewrite any parts which aren’t clear enough.

In the Study Text, I have from LBSF, example 3.2, there’s a fair value adjustment (FVA) and that FVA amount is removed from the opening net assets figure.

The book then separately calculates the gain or loss on the forex of the FVA and subsequently separately calculates the forex difference on the opening net assets.

Then, part of the FVA gain or loss calculation involves calculating and deducting the depreciation from the opening FVA (both the opening FVA and depreciation are translated at the opening and average exchange rate, respectively) and then the carrying amount of the FVA is translated at the closing rate. Finally, the difference between the translated closing amount of the FVA is deducted from the opening $ value of the FVA less the $ value of the depreciation.

The actual calculation was:

FVA at acquisition 0000000/4 (opening exchange rate) = $
Depreciation of FVA amount 000000/5 (average exchange rate) = $
Closing amount of FVA (00-00)/7 =
Loss on Translation = $

1. Is the method above correct for the exam because my class notes do not perform this calculation?

2. In the Study Text, the depreciation relating to a FVA is not deducted from the S’s PAT (prior to translation into the Parent’s currency. In the Study Text, all of the IFRS 3 related adjustments, are solely adjusted for in the CSoPoL and the CSoFP – never in the individual financial statements. However, in my class notes, the depreciation relating to the FVA is deducted from the subsididairy’s PAT and the PAT is then translated to compute the gain or loss on the translation of the sub’s PAT. They produce different results and I am not sure, which one to stick with for the exam.

Is it the case that none of the IFRS 3 related adjustments (such as issues relating to FVAs, PUPs, inter company loans) are made until after the sub’s SoPoL AND SoFP have been translated and the Consolidated Financial Statements are produced and so adjustments relating to IFRS 3 would have no impact on the gain or loss on translation calculations?

Thank you,

Ali