For City Wide's Canadian operations, how are statements of income translated into U.S. dollars for the consolidated financial statements?

According to City Wide's 2025 Franchise Disclosure Document, the financial statements of City Wide Franchise Company of Canada, Inc., a wholly-owned subsidiary domiciled in British Columbia, are consolidated with those of its U.S. parent company. The functional currency for the Canadian operation is the local currency (Canadian dollars). When preparing the consolidated financial statements, the statements of income for the Canadian operation are translated into U.S. dollars using the average exchange rates for the year. This means that each revenue and expense item is converted at the average exchange rate prevailing throughout the accounting period.

Assets and liabilities of the Canadian subsidiary are translated into U.S. dollars using the current exchange rate at the end of each reporting period (December 31, 2024, 2023, and 2022). Any resulting net currency translation adjustment (gain or loss) is not included in the current income statement but is instead recorded in accumulated other comprehensive income (loss) within the equity section of the consolidated balance sheet. This approach reflects the principle that the income statement should reflect the average economic reality over the period, while the balance sheet should reflect the current economic reality at the reporting date.

Gains and losses arising from exchange rate changes on transactions denominated in a currency other than the functional currency of an entity are included in the consolidated statements of income and comprehensive income as incurred. This means that if either the U.S. parent company or the Canadian subsidiary engages in transactions using a currency other than their respective functional currency (USD or CAD), the gains or losses from exchange rate fluctuations are recognized immediately in the income statement.