You are a U.S. parent and you have a subsidiary in Italy. The subsidiary's functional currency is the Swiss franc, and it maintains its accounts in euros. When you consolidate the subsidiary, you will:

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The correct process involves remeasuring the subsidiary's trial balance into its functional currency (Swiss francs) first, since the accounts are maintained in euros which is not its functional currency. After remeasurement into Swiss francs, the next step is to translate the financial statements into the reporting currency of the parent company, which is U.S. dollars. This two-step process ensures that the financial statements reflect the economic conditions of the subsidiary's operating environment (reflected in its functional currency) and are then reported in a consistent currency for consolidation purposes.

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