Foreign Currency Translation Adjustment is written-off to P&L when subsidiary is liquidated. By writing it off I create amount on Balance sheet in local currency ledger. When and how should I write-of
Answers
If I understand the question, you liquidated the sub on the 15th. As of that date you have a FX adjusting value on the sub-side (entry would be due to/from parent and FX expense/gain).
The answer (based on the simplest of possibilities, 100% wholly owned):
I would make the same entries done monthly to adjust the due to/from account so that they are balanced. At that point, you are going to do a final consolidation and send the available cash to the parent company.
Based on cash, you'll make what transactions are necessary on the due to/from account on the parent as well as investment in subsidiary account.
Correct me if I am wrong/misunderstood, but the local books will never have converted amounts (to base currency), only local currency amounts. Hence, nothing special to book at that level when you'll eliminate, only at consolidated level.
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That isn't a 100% correct.
If I'm the parent and I send $100 to my sub in Japan, they aren't going to get a $100 in yen. First, they will get fees and secondly there is always a spread on the bid/ask on conversion.
The parent sent the $100, so there is no FX involved (whether they sent it as US$ or bought ¥) the parent's bank account would have $100 deducted (plus fees I"m sure).
The sub won't get as said before an exact $100 in ¥, but a lesser amount. Assuming they can determine any bank fee, the difference would be booked to FX gain/loss.
The same (but reversed) would be true if the Sub repatriated funds to the Parent.
From the sub's perspective, I believe the answer depends on the currency of inter-company receivable/payable on the sub's book. If the sub's inter-company is to be eventually settled in the local currency...there's nothing to record on the sub's book. If the inter-company on the sub's books is to be eventually settled in foreign currency...there would be a foreign exchange gain/loss depending on the direction of the sub's local currency. I'm not 100% about this, but that's my gut answer.
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Bob I think that is correct.