How do I incorporate foreign subsidiaries into a consolidated cash flows statement?
When all subsidiaries within a group use the same functional currency as the parent company, the consolidated cash flow statement can be prepared directly based on the consolidated balance sheet and income statement. However, if foreign-currency subsidiaries exist, practice often requires preparing their cash flow statements separately first, then consolidating them. This article reviews traditional consolidation steps and raises questions about how to reconcile separately prepared cash flow statements of foreign subsidiaries with the consolidated balance sheet.
At the moment, I am kind of stuck with how to deal with consolidated cash flow statement.
Before the way I did was as below, because all the subs are in the same currency as the parent.
- I combined all the parents and subs in balance sheet and P&L
- Eliminate the equities and investment in subsidiaries (including accounting for non controlling interest).
- Eliminate any intra-company transaction (payable and receivable).
Now I have two subs with foreign currency. I was told that I need to prepare separate a cash flow statement for those two.
My question is, if I do two separate cashflow for those subs with foreign currency, then how do I eliminate them on consolidated balance sheet level because if they are separate cash flow statements, then they wouldn't come from consolidated balance sheet.