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Hi tutor,
For calculating the exchange difference of Tyslar (working #3), may I know why non-monetary items e.g. PPE, are converted at closing rate instead of historical rate?
Many thanks in advance.
Hi,
You’ve got to be so careful that you don’t get the translation of the subsidiary and its consolidation confused with the rules for transactions in the individaul financial statements.
Before we consolidate the subsidiary we need to translate all of the asses and liabilities of the subsidiary at the closing rate, so this means we need to translate the PPE. Don’t think of it as the purchase of an overseas asset and therefore a non-monetary asset that will have been translated at the historic rate and subsequently not translated.
Thanks
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