The value contribution of a subsidiary of a multinational firm to the firm can be reported in the income statement or balance sheet of the consolidated firm

Explain the reporting of the changes in the value of a subsidiary as a result of the change in an exchange rate - changes to the income and the assets of the subsidiary - in the consolidated financial statements of the parent company.
What will be an ideal response?

Answer: The earnings of the subsidiary, once remeasured into the home currency of the parent company, contributes directly to the consolidated income of the firm. An exchange rate change results in fluctuations in the value of the subsidiary's income to the global corporation. If the individual subsidiary in question constitutes a relatively significant or material component of consolidated income, the multinational firm's reported income (and earnings per share, EPS) may be seen to change purely as a result of translation.

Changes in the reporting currency value of the net assets of the subsidiary are passed into consolidated income or equity. If the foreign subsidiary was designated as "dollar functional," remeasurement results in a transaction exposure, which is passed through current consolidated income. If the foreign subsidiary was designated as "local currency functional," translation results in a translation adjustment and is reported in consolidated equity as a translation adjustment. It does not alter reported consolidated net income.