USA Cash Flow - Foreign Currencies and Consolidation


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Parent Company - USD
Subsidiary 123 - GBP
Subsidiary 678 (owned by subsidiary123) - EUR

How do I prepare a consolidated CF in USD with this ownership this structure?
I understand that if we only had the GBP company that we would multiply their BS by an avg exchange rate, multiply cash by ME rates and the plug would go into a line called “effect of exchange rate on cash”. But, I’m unsure how to consolidate the EUR company into the consolidated CF?
Do we prepare a GBP cash flow for the EUR company (using above method) then add that GBP cash flow to the subsidiary 123’s GBP CF and go through the exercise again to translate the consolidated GBP CF into the USD CF?
 
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kirby

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Do we prepare a GBP cash flow for the EUR company (using above method) then add that GBP cash flow to the subsidiary 123’s GBP CF and go through the exercise again to translate the consolidated GBP CF into the USD CF?
Yes but the translation method is more complex than what you described, for example income statement accounts do not use month end rates. So study the translation process then use the method you outlined.
 
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Understood and Thank You! Do you happen to know the formula I can use to check the “effect of exchange rate on cash” number? I’d like a method to check this number instead of it just being a plug. @kirby
 
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kirby

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I do not know of a simple formula especially in your case as you will revalue cash twice.
 

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