How should the calculations, needed for the minority interests’ calculation under Article 81 CRR, be converted into Euros where the local currency of the subsidiary is different from the parent’s currency?
According to Article 81 CRR minority interests shall comprise the sum of Common Equity Tier I instruments, the share premium accounts related to those instruments, retained earnings and other reserves of a subsidiary. In the case where a subsidiary is located in a jurisdiction whose local currency is different from the parent undertaking’s currency, the Regulation does not specify how to translate Common Equity Tier I instruments, the share premium accounts related to those instruments, retained earnings and other reserves of the subsidiary into Euros. CRR only includes a general requirement to use the applicable accounting framework (CRR Article 4(77)).
In the case of a subsidiary whose currency is different from the parent undertaking’s currency, clarification is sought regarding how to translate into Euros the calculations needed for the minority interests’ calculation under Article 81 CRR. Given that CRR includes a general requirement to use the applicable accounting framework (CRR Article 4(77)), for entities that apply IFRS, in order to prepare the consolidated financial statements, the foreign subsidiary’s results and financial position in local currency shall be translated into the Group’s presentation currency (i.e. euro) using the procedures set in IAS 21.
Recital 39 of Regulation (EU) No 575/2013 (CRR) provides that accounting data is the basis for the calculation of own funds and the ‘applicable accounting framework’ for this purpose is defined in Article 4(1)(77) CRR. Therefore, calculations needed for the minority interests’ calculation under Article 81 CRR should be converted into the parent’s presentation currency using the applicable accounting framework referred to in Article 4(1)(77) CRR.
Update 26.03.2021: This Q&A has been reviewed in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR) and continues to be relevant.