I'm new into a role where we have multiple subsidies in the US and Europe, and a question has come up about the treatment of subsidiary retained earnings at year end.
The issue being, last year our retained earnings were, say £500k GBP in our consolidated group accounts. Since the end of the year, if we applied the latest closing BS exchange rate, consolidated retained earnings would be now £550k GBP, whereas the actual figure in each entity has not moved, of course.
My question, as I can't see any clear guidance through international standards - how do we treat this type of valuation/movement? My initial thought is that, regardless of the closing rates, the retained earnings should still consolidate at £500k GBP, and therefore the imbalance in the TB caused by this should be corrected with a "charge" (well, Excel adjustment in our consolidation pack!) to the P&L, as an impact of currency translations. So in this instance an additional £50k credit to the P&L.