A finished ACC-656 Topic 8 group results explanation memo example, reconciling a parent's reported growth to consolidated revenue and explaining a translation loss that bypassed net income. Searches like "acc 656 topic 8 assignment example", "acc656 topic 8 sample" and "acc-656 topic 8 example" land here.
What a finished ACC-656 Topic 8 group results explanation memo looks like
Addressed to the board member, the memo opens with the two questions exactly as asked and answers each in one sentence before any figure. All amounts are illustrative. Consolidated revenue rose from $46.2 million to $48.0 million, about 3.9 percent. The parent's own revenue rose from $30.0 million to $33.3 million, 11 percent, but $3.0 million of that increase was sales to its distribution subsidiary, which the consolidation removes because the group sold nothing to anyone. The second answer concerns the Canadian subsidiary, whose functional currency is the Canadian dollar. Its statements are translated at the year-end rate for assets and liabilities and the average rate for income, and a weaker Canadian dollar produced a $640,000 translation loss. Under ASC 830 that loss goes to other comprehensive income, not net income, which is why equity grew less than profit.
How an ACC-656 Topic 8 example is structured
The memo is written in the order the reader's questions arrived, with the accounting kept behind the answers. Its first paragraph restates both questions and gives the short answers, so a reader who stops there still leaves informed. The revenue question comes second, set out as a three-line bridge from the parent's reported growth to the group's: parent revenue, less intercompany sales to the distributor, plus the other members' outside sales. A third part explains, in two sentences, why sales between members are removed. The equity question follows, with a small table showing the Canadian subsidiary's net assets at the opening and closing rates. A fifth part contrasts translation with remeasurement, stating what would have reached net income if the subsidiary's functional currency had been the US dollar. The memo closes on what the board member should watch next year: the intercompany share of parent sales and the exchange rate.
Short answers before any figure
Both questions receive a one-sentence answer in the opening paragraph, so a board member who reads no further still knows what happened and why.
A bridge from parent growth to group growth
Three lines take the reader from the parent's 11 percent to the group's 3.9 percent, and the largest line is $3.0 million of added sales to a sister company.
Why internal sales vanish, in two sentences
The memo explains elimination in plain terms, that a group cannot sell to itself, without the worksheet entries a board member neither needs nor asked for.
Translation traced to other comprehensive income
The Canadian subsidiary's $640,000 translation loss is shown bypassing net income and reducing equity through accumulated other comprehensive income, which answers the second question directly.
Remeasurement stated as the road not taken
Had the subsidiary's functional currency been the US dollar, remeasurement differences would have reached net income, a point the memo makes to show why the determination matters.
Where marks go in ACC-656 Topic 8
Explanations lose credit here when they are accurate and unreadable for the person who asked. A memo that answers the board member with elimination entries and worksheet columns explains the accounting to the wrong audience and leaves both questions formally answered and practically open. Reconciling the parent's growth to the group's without identifying the intercompany sales as the cause restates the gap without accounting for it. Treating the translation loss as an operating loss, or implying it reduced net income, misstates where ASC 830 sends it and is marked as an error, not a simplification. Papers that never distinguish translation from remeasurement miss the determination that decided the answer. A memo with no forward-looking line, on what to watch in the next set of statements, leaves the reader as dependent on the preparer as before.
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ACC-656 Topic 8 questions, answered
What is the difference between translation and remeasurement?
Translation applies when a foreign subsidiary's functional currency is its local currency: its statements are converted into the reporting currency, and the resulting adjustment goes to other comprehensive income. Remeasurement applies when the books are kept in a currency other than the functional currency, as with a subsidiary operating essentially as an extension of the parent, and exchange differences then go to net income. ASC 830 sets out both.
How is a subsidiary's functional currency determined?
By the economic environment in which it primarily generates and spends cash. Indicators include the currency of its sales prices, its costs, its financing and the extent of its transactions with the parent. A subsidiary that sells locally, pays local costs and finances itself locally usually has the local currency as its functional currency. The determination is a judgment, and a case often turns on it.
Why write for a reader who sees only the consolidated statements?
Because that is who most readers are. Lenders, investors and many directors never see the parent's separate books or the worksheet, and the consolidated figures can look inconsistent with announcements made about individual companies. Explaining the difference in the reader's terms, without the elimination entries, is a skill many rubrics in this course reward, and it tests whether the preparer understands what the consolidation actually did.