Hello,
I understand that, under the remeasurement method of converting local currencies into the parent’s reporting currency, we have to use the temporal method to translate the functional currency into the parent reporting currency. However, I am confused by the intution of this, especially if the firm has its operations closely tied to the HQ.
In this situation, the local currency would most likely be the same as the parent currency, so you would not even need to go through the functional currency via the remeasurement method.
Say a Swiss factory operates in euros
Reports its books in Swiss Francs
But the parent company is in germany and reports numbers in euros. why would it have to be remeasured through the functional currency (swiss francs) when it can just be kept at euros and the numbers rolled up to the parent HQ in germany (which is already in euros)?