Organizing Your Information Setting Up a Worksheet Combining Financial Statements Eliminating Duplicate Values Community Q&A Many large companies are partially or entirely made up of smaller companies that they've acquired throughout the years.After their acquisitions, these smaller companies, or subsidiaries, may have remained legally separate from the large corporation, or parent company.Also CTA is only released through the income statement under very specific situations.Best regards, Sunil Sunil: Thank you for answering my question and for making the offer to contact you with additional questions, I appreciate the assistance.I recently started working for a company that has a Mexican Mequilladora operation and they have not been correctly implementing FAS 52 as it applies to financial statement translation, so when I translated the Mexican operation's financial statements from Pesos to Dollars and went to record the translation loss to equity, I realized I had a one-sided adjustment that was needed in order to bring the Mexican dollar statements back into balance, which I guess means that the foreign currency translation adjustment must only be cumulative translation adjustments for reporting purposes and that it doesn't get recorded in the accounts; or am I doing something wrong?Hi Stephen, The cumulative translation adjustment(CTA) for a foreign currency translation adjustmetn arises as the all of the monetary assets (cash, financial assets, etc.) are translated at the current rate, but the non-monetary assets are translated at the historical rate.However, when reporting financial information, the parent company is required to submit financial statements that combine their information with that of their subsidiaries.
The CTA is recorded in consolidated financial statements. The double entry is will be as follows: Assume you invested an amount of US0 million in the foreign (Mexican) operation - a separate legal entity.
The consolidated financial statements give a valuable overview of how well the entire corporation is being managed and are useful in valuing the company as a whole.
On the balance sheets, the shares owned by outsiders are shown on the balance sheet as an item.
The consolidated balance sheet also includes foreign subsidiaries.
However, it is sometimes difficult to convert the financial statements of a foreign subsidiary back into the parent company's currency.