What are Translation Adjustments?

Translation adjustments are those journal entries made during the process of converting an entity’s financial statements from its functional currency into its reporting currency. These adjustments are made by a corporate parent when it has received financial statements from a subsidiary that use a different currency than the reporting currency of the parent. The adjustments are needed so that the parent can produce consolidated financial statements.

Presentation of Translation Adjustments

Foreign currency translation adjustments are stated as a separate line item on the statement of comprehensive income. A sample line item that contains this adjustment appears in the following exhibit.