With a net asset exposure of a subsidiary, if the foreign currency appreciates, a foreign currency translation gain is seen. I do not understand how is that possible? If there is a net asset exposure with a weaker currency and the foreign currency being stronger, then there should be a loss! Kindly help.
Your subsidiary is a foreign subsidiary reporting in a foreign currency. Your objective is to translate its books from FC to your Reporting Currency and consolidate with your own books. Now, when Foreign Currency has appreciated, and your subsidiary is a Net Asset in that Foreign Currency, this Net Asset will appreciate too, when converted to RC. For example, net asset is say, 100 Yen. Now, yen has appreciated from buying 1 USD to buying 1.25 USD. Net Asset when converted to USD will be now 1.25 USD instead of 1 USD.