Separate financial statement - FCTR

[Asees]

The parent company has a subsidiary in a foreign country that uses a different currency as its functional currency. The investment in the subsidiary is recognized under the equity method in the parent company's books. Under the equity method, we allocate the profit attributable to the parent and reduce it by any dividends received. What about the currency translation reserve? Do we need to consider the Foreign Currency Translation Reserve (FCTR), which arises due to the translation of the subsidiary's financial statements, and allocate this to the parent's financial statements in addition to the subsidiary's profit?

[Ketan Marwah]

Hi Asees,

Yes, exchange differences that arise when translating an investee’s financial statements into the investor’s presentation currency are recognised in OCI (IAS 21.44).