Spindleruv s.r.o. (a Czech company) invests 2,000,000 euros in a foreign subsidiary on January 1, Year 1. The subsidiary commences operations on that date and generates net income of 100,000 euros during its first year of operations. No dividends are sent to the parent this year. Spindleruv uses IFRS in preparing its financial statements. Relevant exchange rates between Spindleruv’s reporting currency, Czech koruna (CZK), and the euro are as follows:

Required:

Determine the amount of translation adjustment that Spindleruv will report on its December 31, Year 1, balance sheet related to this foreign subsidiary assuming that the euro is the foreign subsidiary’s functional currency.

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January 1, Year 1 CZK 25.0 per 1 euro Average, Year 1 CZK 25.5 per 1 euro December 31, Year 1 CZK 27.0 per 1 euro