Foreign subsidiary

Dear Hitesh,

AS per AS-11, Operations of Foreign Subsidiary may be Integral or Non - Integral. it depends on the operational relationship with the Subsidiary and Holding.

Operation of Foreign Subsidiary consider as integral if -

Where the foreign operation is such that it carries on business as if it were an extended arm of the reporting entity, any change in the foreign exchange rate will have an immediate impact on the cash flow of reporting entity.

E.g.

1. A foreign operation will sell only goods imported from the reporting entity and remit back the proceeds to the reporting entity.
2. Acts as a selling agency receiving stocks of goods from and remitting proceeds back to the investing company.
3. Produces raw materials or components and transfers goods for inclusion in the ultimate product being manufactured by reporting company.

Otherwise Operation of Foreign subsidiary will consider as Non integral.

I hope ur query is resolved. if any further clarification required, let me know, i will try me best to resolve the same.

Thanks,

With Best regards,

Shankar