Translation of Financial Statements - Current Rate Method
Kingsfield, a U.S. Company, starts a subsidiary operation in a foreign country on January 1, 2009. The country's currency is the
kumquat (KQ). To start this business, Kingsfield invests 10
Consolidated Financial Statements
Intra-Entity Asset Transactions
Intra-Entity Inventory Transactions
Transactions between the parent and subsidiary are viewed as internal
transactions of a single _ entity.
The effects of those transactions sho
Variable Interest Entities, Intra-Entity Debt, and
Consolidated Statement of Cash Flows
Special Purpose Entities (VIEs)
A business entity formed to accomplish a _ purpose.
A sponsoring firm may own little voting stock but controls the VIE
Bonds Payable Issued by Sub 1/1/04
Date of Issue: January 1, 2004
Face Value = $10,000
Term of Issue = 10 years
Contractual Interest Rate = 7% annually, payable on December 31 each year
Market Interest Rate = 8%
Present Value of the Bond:
Face Value of th
Chapter 7 Consolidated Financial Statements
-Ownership Patterns and Income Taxes
Indirect Subsidiary Control
When a parent controls a subsidiary which in turn controls other firms, a _ or
75 % Ownership
80 % ownership
Demo Question-Chapter 7
On January 1, 2009, Travers Company Acquired 90% of Yarrow Company's outstanding stock for $720,000.
The 10 % noncontrolling interest had an assessed fair value of 80,000 on that date
Any acquisition-date excess fair value
Foreign Currency Transactions
and Hedging Foreign Exchange Risk
Foreign Exchange Markets
Each country uses its own currency for internal economic transactions.
To make transactions in another country, units of that countrys currency must be
Foreign Currency Transaction:
On 12/1/10 Bush Company sells goods to Blair Company on account.
Blair will pay Bush 10,000 British pounds in two months (2/1/11).
Assume the following exchange (spot) rates:
12/1/2010 1 = $1.7950
12/31/2010 1 = $1.8150
Translation of Foreign Currency Financial Statements
Translation of Financial Statements
Often subsidiaries in other countries are required by local regulations to use the
_ currency where they are located.
Their financial statements must be tr
Page 1: Intra-Entity Inventory Transfer
On 9/23/2010, Parent Company buys 100 units of inventory from Sub for $10,000.
The units originally cost Sub $8,000.
At 12/31/2010 (year-end), Parent still had 10 of the units on hand.
Record the consolidation entri