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Further features of company accounts > Fully diluted earnings per share - Pg. 127

f u r t h e r f e at u r e s o f c o m pa n y a c c o u n t s Owning foreign businesses If you have a subsidiary in a foreign country, then, when you consolidate its accounts with yours, you have to translate the figures from the for- eign currency into your own. This translation is usually made at the rate of exchange on the date of the balance sheet. Since the exchange rate is likely to move during the year, then, even if the foreign subsidiary's balance sheet didn't change during the year, the figures you include in your consolidated accounts for the subsidiary will be different from those at the start of the year. This, too, is known as an exchange gain or loss. This exchange gain or loss does not show up on the P&L, however, since it would distort the actual trading performance of the company. Instead, the exchange gain or loss is shown as a separate adjustment in shareholders' equity. The notes to the accounts will iden- tify the size of the adjustments made.