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Foreign Currency - Intercompany Loan to Equity

Wayne O'hare's Profile

In FY15, we (ARI, the parent company) translated an amount loaned to our French subsidiary Bleu using the applicable historical rate. We did the same for the equity amount we contributed to the same subsidiary. This resulted in an unrealized gain of $2 million.

In FY16, we continued to loan money to our French sub Bleu.

On May 1 of FY16, ARI converted $50 million of the outstanding loan to Bleu into equity.

My question is:

Should we should continue to use the historical rate of when ARI loaned the money to Bleu? Or do we need to use the rate at the date the amounts were converted to equity?
If we are to adjust the currency translation to the rate at the date amounts were converted to equity on May 1 16', how would we go about doing that? Would the difference go to OCI or would that somehow cause part of the currency gain/loss to become realized?


Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |

In my mind, any transaction done uses the FX rate as of the date (either exact date, monthly average or ytd average).

That would adjust up or down you FX gain/loss.


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