Question

Jacque Co. is a French company located in Paris. Yankee Corp., located in New York City, acquires Jacque Co. Jacque has the Euro as its local currency and the Swiss Franc as its functional currency. Yankee has the U.S. dollar as its local currency and the U.S. dollar as its functional currency. Required: a) The year-end consolidated financial statements will be prepared in which currency? b) Explain which method is appropriate to use to use at year-end: Translation or Remeasurement?

Answer 1

	Local Currency	Functional Currency
Jacque Co.	Euro	Swiss Franc
Yankee Corp.	US	US
Since, Yakee Corp acquire Jacque Co.
a. Year end consolidated Financial Statement will be prepared in
U.S Dollar as parent Co. i.e Yankee Corp. local and functional
currency is U.S Dollar.
b. Translation and remesurement are two common aspects associated with using foreign currency. Both are based on the principles of exchange rates (the rate at which a currency will be converted to another). However, here is a subtle difference between the two conversion methods. The key difference between translation and remeasurement is that translation is used to express financial results of a business unit in the parent company’s functional currency whereas remeasurement is a process to measure financial results that are denominated or stated in another currency into the functional currency of the organization.
						Since here, Local currency and functional currency of parent
						company is same. Therefore, remeasurement method will not be
						applied.
						So, translation method will be used. Jacque Co. will be first translated
						in to U.S dollar and then consolidated Financial Statement will be
						prepared.