Foreign currency cash flows

IAS 7.25 requires cash flows arising from transactions in a foreign currency to be recorded at the exchange rate between an entity’s functional currency and the foreign currency at the date of the cash flow.

A similar approach is required for cash flows of a foreign subsidiary (IAS 7.26).

IAS 7.27 Foreign currency cash flows notes that cash flows denominated in a foreign currency are dealt with in a manner that is consistent with that required by IAS … Continue reading

Consolidation of overseas subsidiaries

IFRS 10 Consolidated Financial StatementsThe financial statements of foreign subsidiaries must be translated into the group’s presentation currency (which is often, but not always, the parent’s functional currency). The relevant requirements are included in IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’.

In summary the process involves:

  • translating assets and liabilities at closing rate,
  • translating income and expenses at transaction date rates,
  • recording resulting exchange differences in other comprehensive income.
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