Instructional Case: Foreign Subsidiary: Conversion to U.S. GAAP, Translation to U.S. Dollars and Consolidation.

The purpose of this case is to help the student integrate the process of translating foreign currency financial statements with the consolidation process. The financial statements of a British subsidiary are adjusted to U.S. GAAP, and the current-rate method is used to translate them into U.S. dollars. The subsidiary's adjusted, translated financial statements are then used to compute the parent's investment income and translation adjustment for the year under the equity method. Finally, consolidated financial statements are prepared for the U.S. parent and its British subsidiary. A basic ratio analysis and discussion of foreign currency exposure are also included.