Translation of financial statements A U.S.-based MNC has a subsidiary in France

Question

Translation of financial statements A U.S.-based MNC has a subsidiary in France (local currency, euro,) The balance sheet and income statement of the subsidiary follow. On December 31, 2015, the exchange rate is US$1.20/. Assume that the local (euro) figures for the statements remain the same on December 31, 2016. Calculate the U.S. dollar-translated figures for the two ending time periods, assuming that between December 31, 2015, and December 31, 2016, the euro has appreciated against the U.S. dollar by 6%.

Explanation / Answer

All Amounts in Euro and $ stated alongside Translation of Income Statement December 31, 2015 December 31, 2016 Euro US $ Euro US $ (1 Euro = 1.20 $) (1 Euro = 1.128 $) Appreciated by 6% Sales 30000 36000 30000 33840 Cost of Goods Sold 29750 35700 29750 33558 Operating Profits 250 300 250 282 Translation of Balance Sheet December 31, 2015 December 31, 2016 Euro US $ Euro US $ (1 Euro = 1.20 $) (1 Euro = 1.128 $) Assets Cash 40 48 40 45.12 Inventory 300 360 300 338.4 Plant & Equipment 160 192 160 180.48 (Net) Total 500 600 500 564 Liabilities and Shareholders' Equity Debt 240 288 240 270.72 Paid-in Capital 200 240 200 225.6 Retained Earninga 60 72 60 67.68 Total 500 600 500 564

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