Question

Panco, a U.S. entity, has a subsidiary, Sanco, located in a foreign country. Sanco's operations are concentrated in the country in which it is located and are essentially independent of Panco. The economy of the foreign country is not highly inflationary. Which one of the following processes should Panco use to convert Sanco's financial statements to dollar-based statements for consolidation purposes? A. Translation.B. Remeasurement.C. Translation, and then remeasurementD. Remeasurement, and then translation.

Answer 1

Answer:

A is the correct answer.

Explanation:

Financial accounting translation is a corporate accounting process. In this process, the parent company translates the financial statements of its entity in a foreign country into reporting currency. There are three methods of translation. It can be translated by the market rate on the reporting date, by weighted average exchange, and by historical exchange rates. After the translation of financial standards, the parent company should include these amounts into the consolidated income statements.