Consolidating financial statements foreign currency
In accordance with section 308a sentence 3 of the HGB, the currency translation difference recognised in equity is presented within group equity following group revenue reserves.The Standard specifies the use and calculation of exchange rates for translating balance sheet and income statement items.
This applies both to the sale of shares (share deal) and to the disposal of all assets and liabilities of a foreign subsidiary (asset deal).
The Standard encourages entities to apply section 308a of the HGB to the foreign currency financial statements of associates that are measured in the consolidated financial statements using the equity method in accordance with section 312 of the HGB.
In accordance with section 308a of the HGB sentences 1 and 2, all assets, liabilities, prepaid expenses or deferred income, and special items of a foreign subsidiary are generally translated into euros at the mid-market spot rate at the group reporting date, items of equity at historical mid-market spot rates and income statement items at average rates.
of the HGB or consolidated financial statements in accordance with sections 11ff. The application of the requirements of the Standard to translate foreign currency transactions in German GAAP annual financial statements and to the information to be disclosed in the notes to German GAAP annual financial statements, with the necessary modifications, is encouraged.
The scope of the Standard with regard to the translation of foreign currency transactions extends both to the translation of foreign currency transactions at the data of initial recognition and to translation in the course of subsequent measurement in accordance with section 256a in conjunction with section 298(1) of the HGB.
In addition, it addresses other specific issues relating to the application of the modified closing rate method, in particular in connection with individual consolidation adjustments.