In order to consolidate or combine financial statements prepared in different currencies, a reporting entity must have financial statements of its foreign entities in its reporting currency to produce single currency, consolidated financial statements. This process is referred to as translation and is different than remeasuring foreign entity financial statements. A foreign entity remeasures its financial statements into its functional currency when its books and records are maintained in a currency other than its functional currency.
This chapter discusses the steps necessary to remeasure foreign entity financial statements into its functional currency, if necessary, and then how to translate those statements into the reporting currency. This chapter also discusses considerations for determining the appropriate exchange rate at which to translate and remeasure a foreign entity’s financial statements.
See TX 13 for information on the effect of changes in foreign currency exchange rates on the accounting for income taxes.
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