For Burger King's foreign subsidiaries, how are assets and liabilities translated into U.S. dollars?
Burger_King Franchise · 2025 FDDAnswer from 2025 FDD Document
Our functional currency is the U.S. dollar, since our term loans and senior secured notes are denominated in U.S. dollars, and the principal market for our common shares is the U.S. The functional currency of each of our operating subsidiaries is generally the currency of the economic environment in which the subsidiary primarily does business. Our foreign subsidiaries' financial statements are translated into U.S. dollars using the foreign exchange rates applicable to the dates of the financial statements. Assets and liabilities are translated using the end-of-period spot foreign exchange rates. Income, expenses and cash flows are translated at the average foreign exchange rates for each period. Equity accounts are translated at historical foreign exchange rates. The effects of these translation adjustments are reported as a component of accumulated other comprehensive income (loss) ("AOCI") in the consolidated statements of shareholders' equity.
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 109–124)
What This Means (2025 FDD)
According to Burger King's 2025 Franchise Disclosure Document, the company's functional currency is the U.S. dollar. This is because their term loans and senior secured notes are denominated in U.S. dollars. The functional currency of Burger King's operating subsidiaries is generally the currency of the economic environment in which that subsidiary primarily conducts its business.
When translating the financial statements of Burger King's foreign subsidiaries into U.S. dollars, the company uses the foreign exchange rates applicable to the dates of the financial statements. Specifically, assets and liabilities are translated using the end-of-period spot foreign exchange rates. Income, expenses, and cash flows are translated at the average foreign exchange rates for each period. Equity accounts are translated at historical foreign exchange rates.
The effects of these translation adjustments are reported as a component of accumulated other comprehensive income (loss), also known as AOCI, in the consolidated statements of equity. This means that fluctuations in exchange rates that affect the value of foreign assets and liabilities are not immediately recognized in Burger King's income statement but are instead accumulated and reported separately within equity.