Including foreign currency transactions of foreign operations (usually subsidiary companies)—in the financial statements of corporate parent—has already been a complex and labor-intensive work, since long time ago. It’s now become even more challenging doing the same task under the IFRS rules. But there are guidelines for that.
An official guideline about how to include foreign currency transactions and foreign operations in the financial statements of a company, and eventually how to translate financial statements into a presentation currency, is provided by the IAS 21. If you have time, read it. If you don’t, read on.
In the global business environment, having multi-currency transaction is not uncommon at all, especially those companies that have foreign operations or subsidiaries. Basically, a company may present its financial statements in any currencies. But, if the presentation currency differs from the entity’s functional currency, the company should translate its results and financial position into the presentation currency. And if you are its account, then you will have really big big works. There are at least four major activities you would need to perform—depends on certain situations around the subsidiary entity: (1) translating into the presentation currency; (2) translating into the functional currency; (3) translating the foreign currency transactions; and (4) disclose certain situation in the financial footnote. Consider doing the task for three or five foreign operations. Read on for procedures of those translations.
