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"Explain the concept of translation of foreign currency financial statements"

"Explain the concept of translation of foreign currency financial statements"

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Answer #1

Translation of foreign currency financial statement is required to prepare consolidated accounts of holding company which has a subsidiary in a foreign country and has reporting currency different from that of holding company. For example-Amazon US while preparing consolidated financial statement need to translate financial statement of Amazon India from INR to USD to club it with it's own financials.

Assets and liabilities of foreign subsidiary is converted using exhange rate at balance sheet date and Income statement items are converted using the exchange rate as of the dates when those items were originally recognized.

Hope this helps. Please do write back if you need more explanation on this.

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