As the chief financial officer for Harvestors Inc., you are responsible for preparing its consolidated financial statements. Your first problem is how to consolidate the French subsidiary it purchased during the past year. You recently received the subsidiary’s year-end financial statements and find that they are stated in euros. Before you can consolidate the financial statements, you must first convert them from euros to U.S. dollars. You know that foreign financial statements can be either translated or re-measured, and you must now determine which method is appropriate.
What factors should you consider in determining whether the financial statements should be translated or re-measured? Who has the final say in determining which method is used? What are the major differences between translation and re-measurement?