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Basic Question 2 of 7
At what point in the process should the parent company adjust the foreign subsidiary's accounts to bring them in accordance with GAAP?
B. After Translation, but prior to consolidation.
C. After consolidation, but prior to reporting.
D. No adjustments are necessary, since most foreign countries already use GAAP.
E. No adjustment should be necessary. Foreign subsidiaries are required by the SEC to have an accounting system that is consistent with GAAP.
A. Prior to the beginning of the Translation process.
B. After Translation, but prior to consolidation.
C. After consolidation, but prior to reporting.
D. No adjustments are necessary, since most foreign countries already use GAAP.
E. No adjustment should be necessary. Foreign subsidiaries are required by the SEC to have an accounting system that is consistent with GAAP.
User Contributed Comments 4
| User | Comment |
|---|---|
| mimi01 | I do not understand this |
| pjdeschenes | I think the idea is the foreign sub should have a set of GAAP-adjusted books. These have to be generated prior to translation. |
| arudkov | if u use IFRS - first - convert 2 US GAAP in functional currency. second - convert converted GAAP statements 2 presentation currency. |
| vinaysood | Adjustment means to bring in accordance with US GAAP. Hence, it has to be done prior to beginning of Translation. |
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Learning Outcome Statements
compare the current rate method and the temporal method, evaluate how each affects the parent company's balance sheet and income statement, and determine which method is appropriate in various scenarios;
calculate the translation effects and evaluate the translation of a subsidiary's balance sheet and income statement into the parent company's presentation currency;
CFA® 2025 Level II Curriculum, Volume 2, Module 12.