Consolidating financial statements example

For the share capital, the most appropriate seems to apply the , rather than the historical rate applicable when the share capital was issued.

The reason is that it’s easier and logical to fix the rate at the date of the acquisition when the goodwill and/or non-controlling interest are calculated.

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.

Therefore, the share capital amounts to GBP 78 000, rather than GBP 82 340.

If the equity balances result from the transactions with shareholders (for example, share premium), then it’s appropriate to apply the historical rate consistently with the rate applied for the share capital.

If you take action today and subscribe to the IFRS Kit, you’ll get it at discount! Please note that the above table applies when neither functional nor presentation currency are that of a hyperinflationary economy.


The profit shown in German books is the unrealized profit for the group (as the goods are unsold from the group’s perspective).You still need to eliminate the share capital and pre-acquisition profits of a subsidiary with parent’s investment in a subsidiary (plus recognize any goodwill and/or non-controlling interest). We need to follow the rules in IAS 21 The Effects of Changes in Foreign Exchange Rates for translating the financial statements to a presentation currency.


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