The temporal method is used to translate integrated operations and the current-rate method is used to translate self-sustaining operations.
Based on the parent’s relationship with its foreign subsidiary, the translation method attempts to reflect the parent’s exposure to exchange rate changes.
Your accounting software will reserve space in the general ledger for each general ledger account.
The individual entries in the general ledger are always from the total columns of your supporting journals.
If the parent actively participates in the subsidiary’s operating, investing, and financing activities, the subsidiary is integrated.
The parent has the same exposure to foreign currency fluctuations as if it had directly undertaken the transactions.
Data from these business entities may differ even due to different structures of the chart of accounts, accounting policies and currencies used.
The parent places those assets that qualify on its own balance sheet at fair value to show that a portion of the amount paid for the subsidiary was the equivalent of an acquisition price for these items.
That is a major reason why companies such as Microsoft and Procter & Gamble report billions of dollars in intangible assets. GAAP, certain requirements have to be met before such intangibles are recognized as assets on a consolidated balance sheet following a takeover.
When the company is acquired, which of these intangibles are recognized on the consolidated balance sheet produced by the new parent?
Answer: FASB has stated that a parent company must identify all intangibles held by a subsidiary on the date of acquisition.