When a U.S. Company owns a foreign company, a foreign-currency translation adjustment is made before consolidation entries are prepared.

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When a U.S. company owns a foreign company, a foreign-currency translation adjustment is required to account for changes in exchange rates between the functional currency of the foreign subsidiary and the reporting currency of the U.S. parent company. This adjustment is made before consolidation entries are prepared to ensure that the financial statements of the parent company accurately reflect the assets, liabilities, and results of operations of the subsidiary in the consolidated financial statements.

When a US Company Owns a Foreign Company, a Foreign-Currency Translation Adjustment