Financial Statement Translation Americana Corporation established several foreign subsidiaries 20 years ago and the subsidiaries are included in the consolidated financial statements of Americana Corporation. In reviewing Americana’s consolidated financial statements prepared at December 31, 2000, you are asked by a colleague to explain each of the following:

. Why is a different exchange rate used in translating the amounts reported in the income statement and balance sheet?
. Is a cumulative translation adjustment reported in the books of the subsidiary companies or only in the consolidated financial statements? Explain why.
. Although Americana’s subsidiaries reported a profit for 2000, the cumulative translation adjustment reported in the consolidated balance sheet decreased. How might this occur?
. How does the amount by which the subsidiary’s assets exceed its liabilities affect the change in the cumulative translation adjustment during the year when the value of its currency increases against the dollar?