Abstract:
In this paper the author refers to some aspects looking the conversion
of the foreign societies financial statements. This operation is especially used
to establish consolidated accounts by the mother-society that owns foreign
branches. In accordance with IAS 21 “The effects of changes in foreign
exchange rates” the method that is used is the closing rate method. In
accordance with this method all assets and liabilities elements, monetary or
non monetary, must be converted to the exchange rate from the closing date
of the financial exercise and the expenses and the incomes to the exchange
rate from the date when the transactions were made or at the medium
exchange rate of the period. The capitals and the reserves of the society are
converted to the historical rate which is the exchange rate that exists at the
day of its entrance into the consolidation perimeter. The reserves conversion
included into the capital and reserves is realized at the same exchange rate
in which the results that are at the base of those reserves were converted. The
incomes, the expenses and the result are converted at the medium exchange
rate. Further on is presented a practical example to illustrate the conversion
of financial statements (balance-sheet and profit and loss account) of a foreign
branch “A” and also the way in which the debtor reserves of conversion are
decomposed in. The conversion of the elements from the balance-sheet and the
result account produce a difference that is accounted directly into the capital
and reserves. If it is a creditor one it represents a latent gain from foreign
exchange currency and if it is a debtor one signify a latent loss.