| Course | ACC 620 Financial Reporting II |
|---|---|
| Module | Module 9 |
| Paper type | graduate milestone on consolidation, noncontrolling interest and foreign currency translation |
| Length | About 1,010 words, 6 pages |
| Format | APA 7 student paper |
| School | Southern New Hampshire University |
| Program | MS Accounting |
| Updated | October 2026 |
Free sample paper for ACC 620 Module 9
Consolidation of the Monterrey Subsidiary for 2025
[Student Name]
Southern New Hampshire University
ACC 620: Financial Reporting II
Milestone Three
[Instructor Name]
[Date]
The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.
Consolidation of the Monterrey Subsidiary for 2025
Introduction
In 2019 the carrier formed a cross-border logistics company in Monterrey with a Mexican partner. The carrier holds 70 percent of the voting shares, the partner 30 percent. The subsidiary runs drayage across the Laredo crossing, transloading the carrier's refrigerated loads to Mexican tractors, and also hauls for Mexican shippers. This milestone consolidates it into the carrier's 2025 statements under ASC 810, as amended for noncontrolling interests (Financial Accounting Standards Board, 2007), and translates it under ASC 830.
Control
The subsidiary is not a variable interest entity: it is adequately capitalized, its equity holders have voting rights proportionate to their economics and they absorb its losses. Under the voting interest model, owning more than half the votes means control, except where the minority has substantive participating rights. The partner's rights are protective, a veto over selling the company or changing its business, but do not include approval of budgets or management appointments. The carrier controls the subsidiary and consolidates it fully, with the partner's 30 percent shown as a noncontrolling interest.
Functional Currency
ASC 830-10-55-5 lists indicators for determining functional currency. The subsidiary bills about 75 percent of its revenue in pesos to Mexican shippers and to the carrier's Mexican agent; its drivers, fuel and maintenance are paid in pesos; and its equipment loans are with a Monterrey bank. Its cash flows do not directly affect the parent's cash flows day to day. The peso is its functional currency, so its statements are translated, not remeasured. Mexico's cumulative three-year inflation is well below 100 percent, so it is not a highly inflationary economy.
Translation
Assets and liabilities are translated at the closing rate, 20.0 pesos per dollar; income and expenses at the 2025 average rate, 19.0; dividends at the rate on the payment date, 19.5; and contributed capital at historical rates (Hoyle et al., 2021).
Translation of the subsidiary's net assets, 2025
| Item | Pesos, millions | Rate | Dollars, thousands |
|---|---|---|---|
| Net assets, January 1 | 400 | 18.0 | $22,222 |
| Net income | 50 | 19.0 | 2,632 |
| Dividends paid | (20) | 19.5 | (1,026) |
| Expected net assets before adjustment | 430 | $23,828 | |
| Net assets, December 31 | 430 | 20.0 | $21,500 |
| Translation adjustment | $(2,328) |
The peso weakened from 18.0 to 20.0 over the year, so the dollar value of the subsidiary's net assets fell even though it earned income. The $2.33 million loss is not an economic loss realized in cash; it reflects the carrier's exposure as an investor in a peso business, and ASC 830-30-45-12 reports it in other comprehensive income. Louis (2003) found that the translation adjustment is negatively associated with firm value in some settings, which suggests investors do not treat it as pure noise.
Intercompany Loan
The carrier lent the subsidiary $5 million in dollars in 2023 to buy transloading equipment. On the subsidiary's books the dollar loan is a foreign currency liability, and the peso's fall would normally produce a remeasurement loss of MXN 10 million, about $526,000, in its earnings. However, the loan has no repayment schedule, and both parties have documented that neither expects it to be repaid for as long as the venture runs. Under ASC 830-20-35-3, remeasurement of such long-term investment loans is reported in other comprehensive income, not earnings. The loan and the parent's receivable are eliminated in consolidation, and the remeasurement is included within the translation adjustment above.
Eliminations
The subsidiary billed the carrier $6.4 million in 2025 for drayage, recorded as its revenue and the carrier's purchased transportation. The full amount is eliminated, not just 70 percent, because consolidation presents the group as one entity. There is no unrealized profit to defer because the services were consumed. The $800,000 owed by the carrier at year end is eliminated against the subsidiary's receivable. The carrier's $718,000 share of the subsidiary's dividend is eliminated against its dividend income; the partner's $308,000 share reduces the noncontrolling interest.
Noncontrolling Interest
The partner is allocated 30 percent of net income, $789,000, and 30 percent of the translation loss, $698,000. ASC 810-10-45-21 requires attributing losses to the noncontrolling interest even if that results in a deficit balance, though that does not arise here.
Noncontrolling interest roll-forward, in thousands
| Item | Amount |
|---|---|
| Balance, January 1, 30 percent of $22,222 | $6,667 |
| Share of net income | 789 |
| Dividends to the partner | (308) |
| Share of translation loss | (698) |
| Balance, December 31 | $6,450 |
The ending balance equals 30 percent of the subsidiary's $21.5 million translated net assets, which confirms that every allocation is included.
Hedging and Future Recycling
The translation loss raises a question for the carrier's treasurer: should the peso investment be hedged? A net investment hedge under ASC 815, for example a peso-denominated borrowing or a forward contract designated against the carrier's $15.05 million share of net assets, would produce gains when the peso weakens that offset the translation loss in other comprehensive income. The cost is the interest rate differential between pesos and dollars, currently several points a year, which would reduce earnings for a protection that affects only other comprehensive income. Because the carrier has no plan to sell the subsidiary and its earnings are reinvested in Mexican equipment, management has chosen not to hedge, and the market risk discussion should say so. The accumulated translation adjustment stays in equity until the carrier sells or substantially liquidates its interest. At that point, under ASC 830-30-40-1, the accumulated amount moves into earnings and is folded into the result of the sale, so a future sale after years of peso weakness could show a large loss that has already been sitting in equity.
Presentation and Disclosures
The consolidated income statement reports net income in full and then attributes it between the carrier's shareholders and the noncontrolling interest; comprehensive income is attributed the same way. The noncontrolling interest appears within equity, separate from the carrier's own equity. The notes should describe the subsidiary, the carrier's ownership, the functional currency and the translation policy, the accumulated translation adjustment and the long-term intercompany loan designation. Because the subsidiary's revenue, $27.4 million before eliminations, is less than 3 percent of consolidated revenue, separate segment reporting is not required, but its foreign currency exposure deserves a sentence in the market risk discussion.
References
Financial Accounting Standards Board. (2007). Noncontrolling interests in consolidated financial statements (Statement of Financial Accounting Standards No. 160). Author.
Hoyle, J. B., Schaefer, T. F., & Doupnik, T. S. (2021). Advanced accounting (14th ed.). McGraw Hill.
Louis, H. (2003). The value relevance of the foreign translation adjustment. The Accounting Review, 78(4), 1027-1047. https://doi.org/10.2308/accr.2003.78.4.1027
What the ACC 620 Module 9 instructions ask for
The third ACC 620 milestone usually asks you to consolidate a case company's subsidiary, often one that is foreign or less than wholly owned. Plan to establish control under ASC 810, determine the subsidiary's functional currency under ASC 830, translate or remeasure its statements, eliminate intercompany transactions and balances, and allocate net income, other comprehensive income and equity to the noncontrolling interest. Many versions ask for a consolidation worksheet or entries and the related disclosures. Explain each rate choice and elimination, because graders reward understanding why a translation adjustment arises, not only its amount. Tie the noncontrolling interest balance to its share of net assets at the end, and state where the translation adjustment will go if the subsidiary is ever sold.
How this ACC 620 Module 9 milestone three example is built
The milestone consolidates a Monterrey subsidiary the carrier formed with a local partner who holds 30 percent. The peso is the functional currency because the subsidiary earns, spends and borrows mainly in pesos. Income of MXN 50 million translates at the 19.0 average rate to $2.63 million, and net assets of MXN 430 million at the 20.0 closing rate to $21.5 million. The difference creates a $2.33 million translation loss in other comprehensive income, 30 percent of it allocated to the partner. Intercompany drayage of $6.4 million and an $800,000 payable are eliminated. The noncontrolling interest ends at $6.45 million, exactly 30 percent of net assets. The paper also weighs a net investment hedge for the peso exposure.
Where the ACC 620 Module 9 rubric puts the points
Rubrics for the third ACC 620 milestone typically score the control analysis, functional currency determination, translation at correct rates, the translation adjustment, intercompany eliminations, noncontrolling interest allocation, presentation and Codification support. The strongest milestones explain the functional currency indicators, show why translation creates an adjustment in other comprehensive income rather than earnings, and allocate both net income and other comprehensive income to the noncontrolling interest. Graders also reward treatment of intercompany loans and a view on whether the currency exposure should be hedged. Common deductions include remeasuring when translation applies, translating equity at current rates, eliminating only the parent's share of intercompany transactions and presenting the noncontrolling interest outside equity.
ACC 620 Module 9 help: the mistakes that cost points
Consolidation papers most often slip on rates: income statement items at average rates, assets and liabilities at the closing rate, equity at historical rates, with the translation adjustment balancing the result. A second weak spot is the noncontrolling interest, which shares in net income, dividends and other comprehensive income, and which must be presented within equity. If your case has a U.S. dollar functional currency subsidiary, remeasurement applies instead and gains and losses go to earnings. Roll the noncontrolling interest forward from beginning to end before writing; if it does not equal its share of ending net assets, an allocation is missing. The same check works for the parent's share of the translation adjustment.
Get ACC 620 Module 9 written to your instructions
Send the ACC 620 Milestone Three guidelines and the subsidiary data. The milestone will establish control and functional currency, translate the statements, prepare eliminations and allocate results to the noncontrolling interest with Codification support. Your first sample is free and generally arrives in two days. The paper above is an original model document written by our desk, not a submitted student paper and not an official Southern New Hampshire University document.
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ACC 620 Module 9 questions, answered
Where can I find a free ACC 620 Module 9 Milestone Three sample?
This page includes a full ACC 620 Milestone Three consolidating a 70 percent owned Mexican subsidiary with translation and a noncontrolling interest.
How is a foreign subsidiary's functional currency determined?
It is the currency in which the entity mainly earns and spends cash, judged with indicators such as cash flows, sales prices, sales markets, expenses, financing and intercompany transactions.
Which exchange rates are used in translation?
Assets and liabilities at the current rate at the balance sheet date, income and expenses at the rates on transaction dates or an average approximation, and equity at historical rates.
Where is the translation adjustment reported?
In other comprehensive income, accumulated in equity until the foreign entity is sold or substantially liquidated.
How is a noncontrolling interest presented?
Within equity, separately from the parent's equity, with net income and comprehensive income attributable to it shown on the face of the statements.