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Hello,
My question surrounds the following scenario
A company acquires a controlling interest in a company with a different functional currency to itself – in laymans terms a foreign subsidary has been acquired
Now, if the foreign subsidary creates a revaluation reserve after the date of acquisition, for the purposes of preparing the Consol SOFP of the Group, at what exchange rate would the revaluation reserve of the foreign subsidary be translated at? I am aware that Ordinary Share Capital and Pre Acq Reserves of the Foreign Sub are translated at the Historic Rate and that Post Acq Reserves of the Foreign Sub are a balancing figure.
Thanks
Liam
M reasonably sure that revaluation reserve would be translated @ the rate of the date when it was created in subsidiary’s boOks..!
Thanks Nokia – i think so too, given that on Consolidation, the only balancing figure is the POst Acquisition Resrves
Thanks Again
But according to your scenario, the revaluation reserve IS post-acquisition
I personally would translate EVERYTHING ion the SoFP for the subsidiary at closing rate – including share capital and pre-acquisition reserves – I believe that this iS an acceptable alternative treatment.
And this way, you avoid entirely the sort of problem which you raise
Hi mike…
I believe u r talking about ‘the translation of functional currency into another presentation currency’ this way…!good to see alternative method for this..
can u please explain a bit more this alternative as I’m confused that the exchange gain would also go in share capital and pre-acquistion reserve??
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