In preparing the consolidated cash flow statement for an entity with a foreign subsidiary, which of the following statements is most likely to be correct?
A)the cash flow statement of the subsidiary will be prepared in the functional currency of the parent
B)the cash flow statement of the subsidiary will be translated directly into the presentation currency used in the consolidated financial statements
C)the cash flow statement of the subsidiary will not require translation as it will be prepared in the presentation currency used in the consolidated financial statements.
D)there will be not translation since the subsidiary will not itself have to prepare a cash flow statement.

Question

Quizplus · Accepted Answer

In preparing the consolidated cash flow statement, the cash flow statement of the foreign subsidiary will be translated directly into the presentation currency used in the consolidated financial statements. This is done using the average exchange rate for the period. The functional currency of the subsidiary is not relevant in this case.

In Preparing the Consolidated Cash Flow Statement for an Entity