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Consolidating subsidiaries with different year ends

The cost of goods sold for the German subsidiary was EUR 4 500.The profit shown in German books is the unrealized profit for the group (as the goods are unsold from the group’s perspective).You would need to translate them using the closing rate, isn’t it?Therefore, their amount would be EUR 4 500 (German cost of sales) * 0,8562 (closing rate) = 3 853.It stays there and it will become a part of a consolidated profit or loss, because it reflects the foreign exchange exposure resulting from foreign trade. On the consolidation, the exchange rate gain of EUR 50 recorded in the German financial statements in profit or loss (together with the difference that arises on translation of the EUR 50 by the average rate).With regard to profit or loss items, or intragroup sales – you should translate them at the date of a transaction if practical.

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You still need to eliminate intragroup balances and transactions, including unrealized profits on intragroup sales and any dividends paid by a subsidiary to a parent. Just a small note: please, do not mess up a functional currency with a presentation currency. It’s a full IFRS learning package with more than 40 hours of private video tutorials, more than 140 IFRS case studies solved in Excel, more than 180 pages of handouts and many bonuses included. Its functional currency is in most cases GBP (exceptions exist), but this company can decide to prepare its financial statements in EUR or USD – they will be the presentation currencies.

It is translated at the transaction date rate, i.e. At the reporting date (), the consolidated financial statements show: Please note the little trick here.

If the German subsidiary does NOT sell the inventories to the parent, but keeps them at its own warehouse – what would their amount for the consolidation purposes be?

In today’s world, most groups spread their activities abroad and logically different members of the group operate in different currencies.

Is the consolidation process of combining the financial statements of two (or more) companies different when they operate in different currencies? If you want to combine the financial statements prepared in different currencies, you will still follow the same consolidation procedures.

76 comments

  1. Presentation of consolidated financial statements is a compulsory requirement for a parent company that commands majority stakes in one or more subsidiaries.

  2. How do you consolidate subsidiaries with different year ends? Are we required to adjust accounts of the subsidiaries to match the parent entity?

  3. Also entities such as partnerships could be subsidiaries and therefore. Different accounting dates. profit for the year £150 x 80% = £120. The consolidation.

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