What to do with FC Translation reserve?

What to do with FC Translation reserve?

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Hi Everyone

I would like your views on this one.

A ltd (dollar account) holds 100% of B ltd (dollar) who holds 100% of Z (Euro ac). A company has approached A, to buy a controlling stake in Z. However if A was to lose control, on disposal, the cumulative amount of exchange differences that was recognised in equity is reclassified to income statement.

If Z functional currency were to be changed from Euro to Dollar, what impact would there be on A ltd and the Translation reserve balance carried forward from last year? Is there any way for A to dispose of Z that would not impact its income statement?

Thanks.

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John Toon
By John Toon
14th Jun 2013 08:44

No because on partial or full disposal company A will have crystalised an exchange gain or loss.

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