When an entity has an investment in a foreign domiciled entity it is necessary to translate the financial statements of the foreign operation to the currency used by the investor:
A) regardless of the ownership interest in the entity
B) only where the entity is a wholly owned subsidiary
C) where the investor has control over the foreign entity
D) where the investment is material to the investor

Question

Quizplus · Accepted Answer

The translation of the financial statements of a foreign operation is only necessary when the investor has control over the foreign entity, as defined by IFRS 10. Control is defined as the ability to direct the relevant activities of an entity that significantly affect its returns, and the investor must have the power to govern the financial and operating policies of the investee. This applies regardless of the ownership interest in the entity or whether the investment is material to the investor.

When an Entity Has an Investment in a Foreign Domiciled