Which three scenarios result in foreign currency translation during the default consolidation process?

Foreign currency translation occurs when entities within a multinational organization operate with different currencies, necessitating conversions to ensure consistency in financial reporting. In the context of the consolidation process, specific scenarios trigger this translation.

When a parent entity has a different default currency than its own parent, it leads to a necessary translation of financial data to align them with the currency of the parent entity. This ensures that the consolidated financial statements present a unified view of the organization’s assets, liabilities, income, and expenses, reflecting the actual value by converting the data into the parent entity's currency.

The other scenarios, where a parent entity shares the same default currency as its parent, or in the case of a base or shared entity with the same currency as its parent, do not necessitate foreign currency translation. In these situations, financial data remains in the same currency, allowing for straightforward consolidation without the complication of currency conversion. Therefore, when the default currencies do not match, translation is essential to accurately reflect the financial position of the entire organization.