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Currency Translation Adjustments CTA (Equity)

  • 1.  Currency Translation Adjustments CTA (Equity)

    Posted Tue September 24, 2024 04:00 AM

    I am working in a Group based in Europ with subs around the world, 

    Could you help us resolve this practical case ?

    A US holding holds shares of US sub,

    Year 0 : US holding proceeds with a capital injection of 1000 USD in the US sub (1 USD = 1 EUR)

    Year 1 : Closing rate (1EUR = 0.9 USD)

    Year 2 : US holding proceds with a second capital injection for 1000 USD in the US Sub (closing rate (1EUR =0.8USD)

    See below illustration : Aug de Capital means capital injection

    On Year 1&2, should we have Currency Translation Adjustments CTA ?

    How to proceed in Cognos controller to calculate CTA on equity shares in the sub with historical rates per year?

    I found below related to elimination of investment versus equity. If investment is valued at closing rate and equity at historical rate, a FX impact remains in reserves? It doesn't seem to make sense to me.
    Many thanks in advance for your help,
    Agathe


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    agathe sicot
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  • 2.  RE: Currency Translation Adjustments CTA (Equity)

    Posted Wed September 25, 2024 07:07 AM

    Hello

    If the group to which belong your holding in USD and your sub in USD is in Euro. Then for both companies CTA will be calculated if you use historical rates. It depends obviously how you have set-up your chart accounts ( you can find in the slides you are referring to an explanation on how to set up movements on investments and equity to calculate CTA) . The elimination of the investment via E770 by the owner and the transfer of the investment via E775 and the elimination of the equity via E750 by the subsidiary will be done in Euro ( in the group currency). It's important that the field alternative currency conversion is ticked in those three rules . This field means that the elimination will be based on the converted values in Euro. if not ticked it will first do the elimination in USD and the convert the automatic journal at closing rate which will cause discrepancy between the reported values ( at historical rate) and the elimination ( at closing rate)



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    Maximilien de Chestret
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    Original Message