1. User's Guide
  2. Managing Equity Pickup
  3. Examples of Equity Pickup Adjustments
  4. Example 2: Direct Ownership with Translation

Example 2: Direct Ownership with Translation

When the holding company and the subsidiary use different currencies, the subsidiary's equity must be translated into the holding company's currency.

For example, suppose that the holding company uses euros and the subsidiary uses dollars and these conditions apply:

  • H (EUR) owns 80% of A (USD)

  • Investment in A at historical cost: 100 (USD 1 = EUR 1)

  • Actual equity of A: USD $1000 (EUR 1,200: USD 1 = EUR 1.2)

  • Adjustment amount in H related to investment in A =

    (80% * 1,200) = 960 – 100 = 860 Euro


This graphic displays an example of direct ownership with translation.