Translate a foreign subsidiary's financial statements into the group's presentation currency under IAS 21 — closing, average, and historical rates applied by item, with the CTA/FCTR balancing plug generated automatically.
IAS 21 requires different exchange rates to be applied to different items when translating a foreign subsidiary's financial statements — which is why a Currency Translation Adjustment (CTA), also called the Foreign Currency Translation Reserve (FCTR), always arises.
Applied to all assets and liabilities — the spot exchange rate at the balance sheet date. This ensures the balance sheet reflects current economic values.
Applied to all income and expenses — the weighted average rate for the reporting period. Approximates the rate at the date each transaction occurred.
Applied to share capital and retained earnings — the rate prevailing when those equity items were originally recognised. Locks in the original investment value.
Why CTA/FCTR arises: Because the same net assets figure is translated at two different rates — assets and liabilities at the closing rate, but equity at historical rates — the balance sheet cannot balance without a plug. That plug is the CTA, which sits in Other Comprehensive Income (OCI) and accumulates until the subsidiary is disposed of.
Enter the subsidiary's financials in local currency and the three exchange rates — the translated P&L, balance sheet, and CTA are calculated in real time.
| Item | Local Currency (LC) | Rate | Presentation Currency (PC) |
|---|---|---|---|
| Revenue | 800,000 | 1.0800 (Avg) | 864,000 |
| Expenses | (600,000) | 1.0800 (Avg) | (648,000) |
| Net Profit / (Loss) | 200,000 | — | 216,000 |
| Item | LC | Rate | PC |
|---|---|---|---|
| Total Assets | 1,500,000 | 1.1500 (Closing) | 1,725,000 |
| Total Liabilities | (500,000) | 1.1500 (Closing) | (575,000) |
| Net Assets | 1,000,000 | — | 1,150,000 |
| Financed By: | |||
| Share Capital | 700,000 | 1.0000 (Historical) | 700,000 |
| Retained Earnings (opening / other) | 100,000 | 1.0000 (Historical) | 100,000 |
| Net Profit for period | 200,000 | 1.0800 (Avg) | 216,000 |
| CTA / FCTR (balancing plug — OCI) | — | Auto | 134,000 |
| Total Equity | 1,000,000 | — | 1,150,000 |
| Balance check (Net Assets = Total Equity) | ✓ Balanced | ||
This calculator uses a simplified IAS 21 model. In practice: (1) retained earnings that arose in prior periods were translated at the rates prevailing at those times — this calculator applies historical rate to all opening retained earnings as an approximation; (2) dividends paid during the period reduce retained earnings and are translated at the rate on the dividend date; (3) goodwill and fair value adjustments at acquisition are treated as assets of the subsidiary and translated at the closing rate; (4) the CTA is recycled through profit or loss on disposal of the subsidiary; (5) hyperinflationary economies (IAS 29) require a different approach. Always confirm with your consolidation workpaper or accounting software.
BrizoConsol applies closing, average, and historical rates automatically — synced from your accounting software — and generates the CTA for every foreign entity in your group without a single manual entry.
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