Question

Parent Company's wholly-owned subsidiary, Son Corporation, maintains its accounting records in Danish krone. However, because all of Son's branch offices are in Sweden, its functional currency is the Swedish krona. Remeasurement of Son's 20X3 financial statements resulted in a $3,200 loss, and translation of its financial statement resulted in a $2,600 loss. What amount should Parent report as a loss in its income statement for the year ended December 31, 20X3?

Answer 1

Answer:Nill

Explanation:

Foreign exchange transactions occur s between companies in different countries using different currency or a multinational company dealings with it's subsidiary.

However there is a difference between foreign exchange conversion and translation, conversion occurs as a result of selling or buying goods in foreign currency and the exchange rate has changed between the period of purchase and payment. In this situation the loss or gain are posted to the income statement.

Translation or remeasurement of financial position occurs at the year end especially to consolidate a subsidiary account by converting it's currency to the parent's company currency such difference are not posted to income statement but to the net assets.