Olin Ltd. is a foreign subsidiary of Rainier Ltd., a Canadian corporation. Rainier translated Olin's financial statements to Canadian dollars using the temporal method, which resulted in a cumulative translation gain of $15,500. How should the $15,500 be treated on Rainier's consolidated financial statements?
A)The $15,500 should be disclosed in the opening consolidated retained earnings.
B)The $15,500 should be reported on the consolidated SCI.
C)The part of the $15,500 that relates to the prior years should be included in the opening consolidated retained earnings and the balance should be reported on the consolidated SCI.
D)The $15,500 should only be disclosed in the notes to the consolidated financial statements.

Question

Quizplus · Accepted Answer

According to the ASC 830-30-45-6, cumulative translation adjustments should be included in the accumulated other comprehensive income (OCI) section of the consolidated balance sheet. However, any portion of the cumulative translation adjustment that is attributable to a period before the acquisition date should be included in the opening consolidated retained earnings. Therefore, option C is the correct answer as it suggests recognizing the portion related to prior years in the opening consolidated retained earnings and the balance in the consolidated statement of comprehensive income (SCI).

Olin Ltd Is a Foreign Subsidiary of Rainier Ltd