{"id":10398,"date":"2023-02-25T09:09:23","date_gmt":"2023-02-25T09:09:23","guid":{"rendered":"https:\/\/analystprep.com\/study-notes\/?p=10398"},"modified":"2026-01-10T08:39:15","modified_gmt":"2026-01-10T08:39:15","slug":"calculation-translation-effects-evaluation-translation-subsidiarys-balance-sheet-income-statement-parent-companys-presentation-currency","status":"publish","type":"post","link":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculation-translation-effects-evaluation-translation-subsidiarys-balance-sheet-income-statement-parent-companys-presentation-currency\/","title":{"rendered":"Translation Effects of a Subsidiary\u2019s Balance Sheet and Income Statement"},"content":{"rendered":"<script type=\"application\/ld+json\">\r\n{\r\n  \"@context\": \"https:\/\/schema.org\",\r\n  \"@type\": \"QAPage\",\r\n  \"mainEntity\": {\r\n    \"@type\": \"Question\",\r\n    \"name\": \"Reducing balance sheet exposure under the temporal method (USD functional currency)\",\r\n    \"text\": \"Impact Inc. is a US-based multinational with subsidiaries around the world. XYZ is one of the subsidiaries which operates in Singapore. XYZ was acquired in 2014 and has never paid a dividend. The financial data for XYZ for the year ended December 31, 2017 is given below.\\n\\nXYZ\u2019s Balance Sheet as at December 31, 2014\\nCash: SGD 130\\nAccounts receivable: 220\\nInventory: 400\\nFixed assets: 1,500\\nAccumulated depreciation: (200)\\nTotal assets: SGD 2,050\\nAccounts payable: 170\\nLong-term debt: 220\\nCommon stock: 600\\nRetained earnings: 1,060\\nTotal liabilities and equity: SGD 2,050\\n\\nTotal revenues: SGD 4,000\\nNet income: SGD 500\\n\\nApplicable exchange rates (US$ per SG$):\\n31 Dec 2014: 0.670\\nAverage rate in 2014: 0.664\\nWeighted-average rate when inventory was acquired: 0.653\\n31 Dec 2013: 0.651\\nRate when long-term and short-term debt was issued: 0.587\\nRate when fixed assets were acquired: 0.567\\n\\nIf the US dollar were chosen as the functional currency for XYZ in 2014, Impact Inc. could reduce its balance sheet exposure to exchange rates by:\\n\\nA. Issuing SGD 40 million of long-term debt to buy fixed assets.\\nB. Issuing SGD 40 million in short-term debt to purchase marketable securities.\\nC. Selling SGD 40 million of fixed assets for cash.\",\r\n    \"answerCount\": 3,\r\n    \"acceptedAnswer\": {\r\n      \"@type\": \"Answer\",\r\n      \"text\": \"C. Selling SGD 40 million of fixed assets for cash.\",\r\n      \"commentary\": \"With the US dollar as the functional currency, the temporal method is used and balance sheet exposure equals net monetary assets. Net monetary assets = (Cash + Accounts receivable) \u2212 (Accounts payable + Long-term debt) = (130 + 220) \u2212 (170 + 220) = \u221240, a net monetary liability of SGD 40 million. Selling non-monetary fixed assets increases cash (a monetary asset), reducing\/eliminating the net monetary liability. Issuing additional short-term or long-term debt would increase monetary liabilities and increase exposure.\"\r\n    }\r\n  }\r\n}\r\n<\/script>\r\n\r\n<p><iframe loading=\"lazy\" src=\"\/\/www.youtube.com\/embed\/Xbr1G7tg8Fk\" width=\"611\" height=\"343\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\r\n\r\n<p>Recall from the previous LOS that there are two translation methods: the current rate and the temporal methods. To demonstrate the translation effects of a subsidiary\u2019s financial statements into the parent company\u2019s presentation currency, we will look at the following extended examples for both methods:<\/p>\r\n<h4>Example: Translation Methods and Translation Effects<\/h4>\r\n<p>Assume that Agrana is an Austria-based company that has the euro as its presentation currency. Agrana wholly owns a subsidiary in Canada, ABC Ltd. The subsidiary\u2019s balance sheet in Canadian dollars (C$) as of March 31 2016 and March 31, 2017. The following hypothetical exchange rate information is available:<\/p>\r\n<p>$$\\small{\\begin{array}{l|c} \\textbf{Date} &amp; \\textbf{\u20ac per C\\$}\\\\ \\hline\\text{March 16, 2016} &amp; 0.68\\\\ \\hline\\text{March 17, 2017} &amp; 0.80\\\\ \\hline\\text{2017 average exchange rate} &amp; 0.75\\\\ \\hline\\text{Weighted-average rate}\\\\ \\text{when inventory was acquired} &amp; 0.74\\\\ \\end{array}}$$<\/p>\r\n<p>From the exchange rate table, the Canadian dollar appreciated steadily against the euro, from the exchange rate of \u20ac0.68 at the start of the year to \u20ac0.80 at year-end.<\/p>\r\n<div style=\"margin: 0 0 20px 0;\">\r\n  <a\r\n    href=\"https:\/\/analystprep.com\/free-trial\/\"\r\n    target=\"_blank\"\r\n    rel=\"noopener noreferrer\"\r\n    style=\"\r\n      display: inline-block;\r\n      border: 2px solid #1e63ff;\r\n      color: #1e63ff;\r\n      background: #ffffff;\r\n      padding: 10px 14px;\r\n      border-radius: 10px;\r\n      font-weight: 500;\r\n      line-height: 1.35;\r\n      text-decoration: none;\r\n    \"\r\n  >\r\n    Want to practice foreign currency translation effects on financial statements for CFA Level II? Try AnalystPrep\u2019s free trial now.\r\n  <\/a>\r\n<\/div>\r\n\r\n<p>To translate ABC\u2019s Canadian dollar financial statements into euro for consolidation purposes, Agrana needs to come up with translation worksheets for the balance sheet and the income statement. The tables that follow show the translation worksheets for ABC\u2019s balance sheet and income statement, respectively, as of 31 March 2017.<\/p>\r\n<p>$$ \\textbf{ABC&#8217;s Balance Sheet} $$<\/p>\r\n<p>$$\\small{\\begin{array}{l|r|r|r|r|r|r} {}&amp; {\\textbf{As at}\\\\ \\textbf{March 31, 2016}} &amp; {\\textbf{As at}\\\\ \\textbf{March 31, 2017}} &amp; \\textbf{Current Rate Method} &amp; \\textbf{\u20ac per C\\$} &amp; \\textbf{Temporal Method} &amp; {}\\\\ \\hline \\text{Cash} &amp; 200 &amp; 800 &amp; 640 &amp; \\text{0.80 C} &amp; 640 &amp; \\text{0.80 C}\\\\ \\hline\\text{Accounts}\\\\ \\text{receivable} &amp; 1,000 &amp; 2,600 &amp; 2,080 &amp; \\text{0.80 C} &amp; 2,080 &amp; \\text{0.80 C}\\\\ \\hline \\text{Inventory} &amp; 4,000 &amp; 3,600 &amp; 2,880 &amp; \\text{0.80 C} &amp; 2,664 &amp; \\text{0.74 H}\\\\ \\hline\\textbf{Current assets} &amp; \\textbf{5,200} &amp; \\textbf{7,000} &amp; \\textbf{5,600} &amp; {}&amp; \\textbf{5,384} &amp; {}\\\\ \\hline \\text{Fixed assets} &amp; 2,400 &amp; 6,400 &amp; 5,120 &amp; \\text{0.80 C} &amp; 4,352 &amp; \\text{0.68 H}\\\\ \\hline\\text{Depreciation} &amp; 100 &amp; 700 &amp; 476 &amp; \\text{0.68 H} &amp; 476 &amp; \\text{0.68 H}\\\\ \\hline\\textbf{Net fixed}\\\\ \\textbf{assets} &amp; \\textbf{2,300} &amp; \\textbf{5,700} &amp; \\textbf{4,644} &amp; \\textbf{0.80 C} &amp; \\textbf{3,876} &amp;{}\\\\ \\hline\\textbf{Total assets} &amp; \\textbf{7,500} &amp; \\textbf{12,700} &amp; \\textbf{10,244} &amp; {} &amp; \\textbf{9,260} &amp; {}\\\\ \\hline \\text{Accounts}\\\\ \\text{payable} &amp; 800 &amp; 2,000 &amp; 1,600 &amp; \\text{0.80 C} &amp; 1,600 &amp; \\text{0.80 C}\\\\ \\hline\\text{Short-term debt} &amp; 600 &amp; 400 &amp; 320 &amp; \\text{0.80 C} &amp; 320 &amp; \\text{0.80 C}\\\\ \\hline\\text{long term debt} &amp; 2,200 &amp; 3,750 &amp; 3,000 &amp; \\text{0.80 C} &amp; 3,000 &amp; \\text{0.80 C}\\\\ \\hline \\text{Common stock} &amp; 3,200 &amp; 3,200 &amp; 2,176 &amp; \\text{0.68} H &amp; 2,176 &amp; \\text{0.68 H}\\\\ \\hline \\text{Retained}\\\\ \\text{earnings} &amp; 700 &amp; 3,350 &amp; 2,464 &amp;{} &amp; 2,164 &amp; \\text{0.68 H}\\\\ \\hline\\textbf{Total equity} &amp; \\textbf{3,900} &amp; \\textbf{6,550} &amp;{} &amp; {}&amp;{} &amp;{}\\\\ \\hline\\textbf{Cumulative}\\\\ \\textbf{translation}\\\\ \\textbf{adjustment} &amp;{} &amp;{} &amp;\\textbf{ 685} &amp;{} &amp;{} &amp;{}\\\\ \\hline\\textbf{Total}\\\\ \\textbf{liabilities}\\\\ \\textbf{and equity} &amp; \\textbf{7,500} &amp; \\textbf{12,700} &amp; \\textbf{10,244} &amp;{} &amp; \\textbf{9,260} &amp;{}\\\\\u00a0 \\end{array}}$$<\/p>\r\n<p>Where: C = Current exchange rate; A = Average-for-the-year exchange rate; H = Historical exchange rate<\/p>\r\n<p>$$ \\textbf{ABC\u2019s Income Statement for the Year Ended 31 March 2017} $$<\/p>\r\n<p style=\"text-align: left;\">$$\\small{\\begin{array}{l|r|r|r|r|r} {}&amp;{} &amp; \\textbf{Current Rate Method} &amp; {} &amp; \\textbf{Temporal Method} &amp; {}\\\\ \\hline\\text{Revenue} &amp; 19,050 &amp; 14,288 &amp; \\text{0.75 A} &amp; 14,288 &amp; \\text{0.75 A}\\\\ \\hline\\text{Cost of goods}\\\\ \\text{and services} &amp; 12,600 &amp; 9,450 &amp; \\text{0.75 A} &amp; 9,324 &amp; \\text{0.74 H}\\\\ \\hline \\text{Gross margin} &amp; 6,450 &amp; 4,838 &amp; \\text{0.75 A} &amp; \\text{4,964} &amp;{}\\\\ \\hline\\text{Depreciation} &amp; 600 &amp; 450 &amp; \\text{0.75 A} &amp; 408 &amp; \\text{0.68 H}\\\\ \\hline\\text{Other Expenses} &amp; 3,200 &amp; 2,400 &amp; \\text{0.75 A} &amp; 2,400 &amp; \\text{0.75 A}\\\\ \\hline \\text{Net income} &amp; 2,650 &amp; 1,988 &amp; \\text{0.75 A} &amp; 2,156 &amp; {}\\\\ \\hline \\text{Remeasurement}\\\\ \\text{gain\/loss} &amp;{} &amp; {}&amp;{} &amp; (468) &amp; {}\\\\ \\hline \\text{Increase in the}\\\\\u00a0 \\text{retained}\\\\ \\text{earnings} &amp; {}&amp;{} &amp; {}&amp; 1,688 &amp; \\text{0.68 H}\\\\\u00a0 \\end{array}}$$<\/p>\r\n<p style=\"text-align: left;\">Where: C = Current exchange rate; A = Average-for-the-year exchange rate; H = Historical exchange rate<\/p>\r\n<p>The translation worksheets above show the two approaches used to translate ABC\u2019s financial statements under different scenarios. First, assume that ABC\u2019s <b>functional currency <\/b>is the <b>Canadian dollar<\/b>. The <b>current rate method<\/b> must be used. The items of the 2017 income statement are translated at the <b>average exchange rate,<\/b> which is (\u20ac0.75). The closing balance in retained earnings as of 31 March 2017 of \u20ac2,464 is transferred to the Canadian dollar balance sheet. <b>Assets and liabilities<\/b> are then translated at the <b>current exchange rate<\/b> (\u20ac0.80) on the balance sheet date of 31 March 2017, and the <b>common stock account<\/b> is translated at the <b>historical exchange rate (\u20ac0.68)<\/b>.<\/p>\r\n<p style=\"text-align: left;\"><b>A positive cumulative translation adjustment<\/b> of \u20ac685 is needed as a balancing amount, which is reported in the stockholders\u2019 equity section.<\/p>\r\n<p>On the other hand, if Agrana determines that ABC\u2019s <b>functional currency<\/b> is the <strong>e<\/strong><b>uro<\/b>, the temporal method is applicable. In this method, inventory, fixed assets, accumulated depreciation, cost of goods and services, and depreciation are translated at the historical exchange rate, i.e., \u20ac0.68 in the case of fixed assets, and \u20ac0.74 for inventory.<\/p>\r\n<p>An amount equal to \u20ac2,164 is determined as the amount of retained earnings needed to keep the balance sheet in balance. The amount is transferred to the income statement as of 31 March 2017. Items on the income statement are then translated. The cost of goods and services and depreciation are translated at historical exchange rates. <b>A negative translation adjustment of \u20ac468<\/b> is determined as the amount needed to arrive at the closing balance in retained earnings of \u20ac2,164. The adjustment is reported as a translation loss on the income statement.<\/p>\r\n<p style=\"text-align: left;\">Under the <b>current rate method<\/b>, the <b>positive translation adjustment<\/b> is explained by the fact that ABC has a net asset balance sheet exposure. Recall that:<\/p>\r\n<p>$$ \\text{Net asset balance sheet exposure = Total assets + Total liabilities} $$<\/p>\r\n<p style=\"text-align: left;\">So ABC\u2019s total assets exceeded the total liabilities in 2017, and the Canadian dollar appreciated relative to the euro.<\/p>\r\n<p>Moreover, under the<b> temporal method<\/b>, ABC has a net liability balance sheet exposure. This is because the amount of exposed liabilities [accounts payable plus notes payable] exceeds that of exposed assets [cash plus receivables]. The result is called a <b>negative translation adjustment (translation loss)<\/b> when the Canadian dollar appreciates against the euro.<\/p>\r\n<blockquote>\r\n<h2 style=\"text-align: left;\">Question<\/h2>\r\n<p style=\"text-align: left;\">Impact Inc. is a US-based multinational with subsidiaries around the world. XYZ is one of the subsidiaries which operates in Singapore. XYZ was acquired in 2014 and has never paid a dividend. The financial data for XYZ for the year ended December 31, 2017 is given in the table below:<\/p>\r\n<p>$$ \\textbf{XYZ\u2019s Balance Sheet as at December 31, 2014} $$<\/p>\r\n<p>$$\\small{\\begin{array}{l|c} \\text{Cash} &amp; \\text{SGD 130}\\\\ \\hline\\text{Accounts receivable} &amp; 220\\\\ \\hline\\text{Inventory} &amp; 400\\\\ \\hline\\text{Fixed assets} &amp; 1,500 \\\\ \\hline\\text{Accumulated depreciation} &amp; (200)\\\\ \\hline\\text{Total assets} &amp; \\text{SGD 2,050}\\\\ \\hline \\text{Accounts payable} &amp; 170\\\\ \\hline\\text{Long-term debt} &amp; 220\\\\ \\hline\\text{Common stock} &amp; 600\\\\ \\hline \\text{Retained earnings} &amp; 1,060\\\\ \\hline \\text{Total liabilities and equity} &amp; \\text{SGD 2,050}\\\\ \\hline \\text{Total revenues} &amp; \\text{SGD 4,000}\\\\ \\hline\\text{Net income} &amp; \\text{SGD 500}\\\\\u00a0 \\end{array}}$$<\/p>\r\n<p>The exchange rates applicable to XYZ are as given in the table below:<\/p>\r\n<p>$$\\begin{array}{l|c} \\textbf{Date} &amp; \\textbf{US\\$ per SG\\$}\\\\ \\hline\\text{31 December 2014} &amp; 0.670\\\\ \\hline\\text{Average rate in 2014} &amp; 0.664\\\\ \\hline\\text{Weighted-average rate when inventory was acquired} &amp; 0.653\\\\ \\hline\\text{31 December 2013} &amp; 0.651\\\\ \\hline\\text{Rate when long-term and short-term}\\\\ \\text{debt was issued} &amp; 0.587\\\\ \\hline\\text{Rate when fixed assets were acquired} &amp; 0.567\\\\\u00a0 \\end{array}$$<\/p>\r\n<p>If the US dollar were chosen as the functional currency for XYZ in 2014, Impact Inc. could reduce its balance sheet exposure to exchange rates by:<\/p>\r\n<p>\u00a0 \u00a0A. Issuing SGD40 million of long-term debt to buy fixed assets.<\/p>\r\n<p>\u00a0 \u00a0B. Issuing SGD40 million in short-term debt to purchase marketable securities.<\/p>\r\n<p>\u00a0 \u00a0C. Selling SGD40 million of fixed assets for a case.<\/p>\r\n<h4>Solution<\/h4>\r\n<p><strong>The correct answer is C<\/strong>.<\/p>\r\n<p>Since the US dollar is used as the functional currency, the temporal method must be applied. Balance sheet exposure will be the net monetary assets of \\(130+220-170-220 = -40\\) or a net monetary liability of SGD40 million. This net monetary liability would be eliminated if the non-monetary assets, i.e., fixed assets, were sold to increase cash.<\/p>\r\n<p><strong>A and B are incorrect<\/strong>. Issuing short-term or long-term debt would increase the net monetary liability, thus increasing the balance sheet exposure to exchange rates.<\/p>\r\n<\/blockquote>\r\n<p>Reading 13: Multinational Operations<\/p>\r\n<p><em>LOS 13 (e) Calculate the translation effects and evaluate the translation of a subsidiary\u2019s balance sheet and income statement into the parent company\u2019s presentation currency.<\/em><\/p>\r\n<div style=\"text-align: center; margin: 32px 0;\">\r\n  <a\r\n    href=\"https:\/\/analystprep.com\/free-trial\/\"\r\n    target=\"_blank\"\r\n    rel=\"noopener noreferrer\"\r\n    style=\"\r\n      display: inline-block;\r\n      background-color: #1e63ff;\r\n      color: #ffffff;\r\n      padding: 12px 26px;\r\n      border-radius: 12px;\r\n      font-weight: 600;\r\n      font-size: 16px;\r\n      text-decoration: none;\r\n    \"\r\n  >\r\n    Start Free Trial \u2192\r\n  <\/a>\r\n\r\n  <div style=\"margin-top: 10px; font-size: 14px; color: #374151;\">\r\n    Practice CFA Level II FRA questions on current rate vs temporal methods, translation gains and losses, and ratio impacts with clear solutions.\r\n  <\/div>\r\n<\/div>\r\n","protected":false},"excerpt":{"rendered":"<p>Recall from the previous LOS that there are two translation methods: the current rate and the temporal methods. To demonstrate the translation effects of a subsidiary\u2019s financial statements into the parent company\u2019s presentation currency, we will look at the following&#8230;<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[102,312],"tags":[129,216,313,131,130],"class_list":["post-10398","post","type-post","status-publish","format-standard","hentry","category-cfa-level-2","category-financial-reporting-and-analysis-fra","tag-calculation-of-translation-effects","tag-cfa-level-2","tag-financial-reporting-and-analysis-fra","tag-subsidiarys-income-statement","tag-subsidiarys-balance-sheet","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Translation Effects of Subsidiary Financials | CFA II<\/title>\n<meta name=\"description\" content=\"Explains how subsidiary balance sheets and income statements are translated using the current rate and temporal methods in consolidated reporting.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculation-translation-effects-evaluation-translation-subsidiarys-balance-sheet-income-statement-parent-companys-presentation-currency\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Translation Effects of Subsidiary Financials | CFA II\" \/>\n<meta property=\"og:description\" content=\"Explains how subsidiary balance sheets and income statements are translated using the current rate and temporal methods in consolidated reporting.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculation-translation-effects-evaluation-translation-subsidiarys-balance-sheet-income-statement-parent-companys-presentation-currency\/\" \/>\n<meta property=\"og:site_name\" content=\"CFA, FRM, and Actuarial Exams Study Notes\" \/>\n<meta property=\"article:published_time\" content=\"2023-02-25T09:09:23+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-01-10T08:39:15+00:00\" \/>\n<meta name=\"author\" content=\"Irene R\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Irene R\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/calculation-translation-effects-evaluation-translation-subsidiarys-balance-sheet-income-statement-parent-companys-presentation-currency\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/calculation-translation-effects-evaluation-translation-subsidiarys-balance-sheet-income-statement-parent-companys-presentation-currency\\\/\"},\"author\":{\"name\":\"Irene R\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/#\\\/schema\\\/person\\\/7002f30d8f174958802c1c30b167eaf5\"},\"headline\":\"Translation Effects of a Subsidiary\u2019s Balance Sheet and Income Statement\",\"datePublished\":\"2023-02-25T09:09:23+00:00\",\"dateModified\":\"2026-01-10T08:39:15+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/calculation-translation-effects-evaluation-translation-subsidiarys-balance-sheet-income-statement-parent-companys-presentation-currency\\\/\"},\"wordCount\":1449,\"keywords\":[\"Calculation of Translation Effects\",\"CFA-level-2\",\"Financial Reporting and Analysis (FRA)\",\"Subsidiary's Income Statement\",\"Subsidiary\u2019s Balance Sheet\"],\"articleSection\":[\"CFA Level II Study Notes\",\"Financial Reporting and Analysis (FRA)\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/calculation-translation-effects-evaluation-translation-subsidiarys-balance-sheet-income-statement-parent-companys-presentation-currency\\\/\",\"url\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/calculation-translation-effects-evaluation-translation-subsidiarys-balance-sheet-income-statement-parent-companys-presentation-currency\\\/\",\"name\":\"Translation Effects of Subsidiary Financials | CFA II\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/#website\"},\"datePublished\":\"2023-02-25T09:09:23+00:00\",\"dateModified\":\"2026-01-10T08:39:15+00:00\",\"author\":{\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/#\\\/schema\\\/person\\\/7002f30d8f174958802c1c30b167eaf5\"},\"description\":\"Explains how subsidiary balance sheets and income statements are translated using the current rate and temporal methods in consolidated reporting.\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/calculation-translation-effects-evaluation-translation-subsidiarys-balance-sheet-income-statement-parent-companys-presentation-currency\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/calculation-translation-effects-evaluation-translation-subsidiarys-balance-sheet-income-statement-parent-companys-presentation-currency\\\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/calculation-translation-effects-evaluation-translation-subsidiarys-balance-sheet-income-statement-parent-companys-presentation-currency\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Translation Effects of a Subsidiary\u2019s Balance Sheet and Income Statement\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/#website\",\"url\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/\",\"name\":\"CFA, FRM, and Actuarial Exams Study Notes\",\"description\":\"Question Bank and Study Notes for the CFA, FRM, and Actuarial exams\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/#\\\/schema\\\/person\\\/7002f30d8f174958802c1c30b167eaf5\",\"name\":\"Irene R\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/33caf1e1bcb63ee970b36351f165c7bc714b19614993ab9c2c8bf36273b7df48?s=96&d=mm&r=g\",\"url\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/33caf1e1bcb63ee970b36351f165c7bc714b19614993ab9c2c8bf36273b7df48?s=96&d=mm&r=g\",\"contentUrl\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/33caf1e1bcb63ee970b36351f165c7bc714b19614993ab9c2c8bf36273b7df48?s=96&d=mm&r=g\",\"caption\":\"Irene R\"},\"url\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/author\\\/irene\\\/\"}]}<\/script>\n<meta property=\"og:video\" content=\"https:\/\/www.youtube.com\/embed\/Xbr1G7tg8Fk\" \/>\n<meta property=\"og:video:type\" content=\"text\/html\" \/>\n<meta property=\"og:video:duration\" content=\"2957\" \/>\n<meta property=\"og:video:width\" content=\"480\" \/>\n<meta property=\"og:video:height\" content=\"270\" \/>\n<meta property=\"ya:ovs:adult\" content=\"false\" \/>\n<meta property=\"ya:ovs:upload_date\" content=\"2023-02-25T09:09:23+00:00\" \/>\n<meta property=\"ya:ovs:allow_embed\" content=\"true\" \/>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Translation Effects of Subsidiary Financials | CFA II","description":"Explains how subsidiary balance sheets and income statements are translated using the current rate and temporal methods in consolidated reporting.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculation-translation-effects-evaluation-translation-subsidiarys-balance-sheet-income-statement-parent-companys-presentation-currency\/","og_locale":"en_US","og_type":"article","og_title":"Translation Effects of Subsidiary Financials | CFA II","og_description":"Explains how subsidiary balance sheets and income statements are translated using the current rate and temporal methods in consolidated reporting.","og_url":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculation-translation-effects-evaluation-translation-subsidiarys-balance-sheet-income-statement-parent-companys-presentation-currency\/","og_site_name":"CFA, FRM, and Actuarial Exams Study Notes","article_published_time":"2023-02-25T09:09:23+00:00","article_modified_time":"2026-01-10T08:39:15+00:00","author":"Irene R","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Irene R","Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculation-translation-effects-evaluation-translation-subsidiarys-balance-sheet-income-statement-parent-companys-presentation-currency\/#article","isPartOf":{"@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculation-translation-effects-evaluation-translation-subsidiarys-balance-sheet-income-statement-parent-companys-presentation-currency\/"},"author":{"name":"Irene R","@id":"https:\/\/analystprep.com\/study-notes\/#\/schema\/person\/7002f30d8f174958802c1c30b167eaf5"},"headline":"Translation Effects of a Subsidiary\u2019s Balance Sheet and Income Statement","datePublished":"2023-02-25T09:09:23+00:00","dateModified":"2026-01-10T08:39:15+00:00","mainEntityOfPage":{"@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculation-translation-effects-evaluation-translation-subsidiarys-balance-sheet-income-statement-parent-companys-presentation-currency\/"},"wordCount":1449,"keywords":["Calculation of Translation Effects","CFA-level-2","Financial Reporting and Analysis (FRA)","Subsidiary's Income Statement","Subsidiary\u2019s Balance Sheet"],"articleSection":["CFA Level II Study Notes","Financial Reporting and Analysis (FRA)"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculation-translation-effects-evaluation-translation-subsidiarys-balance-sheet-income-statement-parent-companys-presentation-currency\/","url":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculation-translation-effects-evaluation-translation-subsidiarys-balance-sheet-income-statement-parent-companys-presentation-currency\/","name":"Translation Effects of Subsidiary Financials | CFA II","isPartOf":{"@id":"https:\/\/analystprep.com\/study-notes\/#website"},"datePublished":"2023-02-25T09:09:23+00:00","dateModified":"2026-01-10T08:39:15+00:00","author":{"@id":"https:\/\/analystprep.com\/study-notes\/#\/schema\/person\/7002f30d8f174958802c1c30b167eaf5"},"description":"Explains how subsidiary balance sheets and income statements are translated using the current rate and temporal methods in consolidated reporting.","breadcrumb":{"@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculation-translation-effects-evaluation-translation-subsidiarys-balance-sheet-income-statement-parent-companys-presentation-currency\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculation-translation-effects-evaluation-translation-subsidiarys-balance-sheet-income-statement-parent-companys-presentation-currency\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculation-translation-effects-evaluation-translation-subsidiarys-balance-sheet-income-statement-parent-companys-presentation-currency\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/analystprep.com\/study-notes\/"},{"@type":"ListItem","position":2,"name":"Translation Effects of a Subsidiary\u2019s Balance Sheet and Income Statement"}]},{"@type":"WebSite","@id":"https:\/\/analystprep.com\/study-notes\/#website","url":"https:\/\/analystprep.com\/study-notes\/","name":"CFA, FRM, and Actuarial Exams Study Notes","description":"Question Bank and Study Notes for the CFA, FRM, and Actuarial exams","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/analystprep.com\/study-notes\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/analystprep.com\/study-notes\/#\/schema\/person\/7002f30d8f174958802c1c30b167eaf5","name":"Irene R","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/secure.gravatar.com\/avatar\/33caf1e1bcb63ee970b36351f165c7bc714b19614993ab9c2c8bf36273b7df48?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/33caf1e1bcb63ee970b36351f165c7bc714b19614993ab9c2c8bf36273b7df48?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/33caf1e1bcb63ee970b36351f165c7bc714b19614993ab9c2c8bf36273b7df48?s=96&d=mm&r=g","caption":"Irene R"},"url":"https:\/\/analystprep.com\/study-notes\/author\/irene\/"}]},"og_video":"https:\/\/www.youtube.com\/embed\/Xbr1G7tg8Fk","og_video_type":"text\/html","og_video_duration":"2957","og_video_width":"480","og_video_height":"270","ya_ovs_adult":"false","ya_ovs_upload_date":"2023-02-25T09:09:23+00:00","ya_ovs_allow_embed":"true"},"_links":{"self":[{"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/posts\/10398","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/comments?post=10398"}],"version-history":[{"count":51,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/posts\/10398\/revisions"}],"predecessor-version":[{"id":41841,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/posts\/10398\/revisions\/41841"}],"wp:attachment":[{"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/media?parent=10398"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/categories?post=10398"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/tags?post=10398"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}