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Accountants' Handbook, Volume One, Financial Accounting and General Topics, 12th Edition by Lynford Graham, D. R. Carmichael

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Chapter 9

Consolidation, Translation, and the Equity Method

James Mraz, CPA, MBA

University of Maryland University College

9.1 Overview

(a) Consolidation

(i) Consolidation Policy

(ii) Intercompany Amounts

(iii) Variable Interest Entities

(iv) Disclosures

(b) Business Combinations

(c) Translation

(d) Equity Method

(e) Combined Financial Statements

(f) Consolidating Statements

(g) Securities and Exchange Commission Rules and Regulations on Consolidated Financial Statements

(i) Selection of Reporting Entity

(ii) Intercompany Items and Transactions

(iii) Other Disclosures

9.2 Foreign Currency Translation

(a) Objectives of Translation

(b) Assumptions Concerning Translation

(c) Tasks Required for Translation

(i) Identifying the Functional Currency

(ii) Remeasurement into the Functional Currency

(iii) Translation Using the Current Rate

(iv) Translation Adjustments

(d) Treatment of Foreign Components or Extensions of Parent Company Operations

(e) Treatment of Foreign Currency Transactions

(f) Forward Exchange Contracts

(i) Discounts or Premiums on Forward Exchange Contracts

(ii) Gains or Losses on Forward Exchange Contracts

(g) Exclusion of Transaction Gains and Losses from Income

(i) Treatment as Translation Adjustments

(ii) Deferral of Transaction Gains and Losses

(h) Other Topics in Foreign Currency Translation

(i) Income Tax Considerations

(ii) Intercompany Profit Eliminations

(iii) Selection of Exchange Rates

(iv) Approximations

(i) Disclosures Concerning Foreign Operations

9.3 Equity ...

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