2.4 Foreign currency
Foreign currency transactions and balances
Significant transactions in foreign currencies are translated into the respective functional currencies at the exchange rates effective at the transaction dates, otherwise the average rate of the previous month is used for non-significant transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the exchange rate effective at the period end date.
The resulting exchange gains or losses are recorded in the consolidated statements of operations in financial gain (loss).
Foreign currency translation
The assets and liabilities of foreign operations having a functional currency different from the euro are translated into euros at the period end exchange rate. The income and expenses of foreign operations are translated into euros using the average exchange rate for the reporting period.
Gains and losses arising from currency translation are recognized in other comprehensive loss. When a foreign operation is partly or fully divested, the associated share of gains and losses recognized in the currency translation reserve is transferred to the consolidated statements of operations.
Consolidated financial statements are then converted into dollars using the method described in Note 2.2.
The difference in effect of exchange rate changes on cash and cash equivalents between the statements of consolidated operations and consolidated cash flows is mainly explained by the following elements:
| • | the differential between the average exchange rate and the period end rates applied to the cash flows of the period; |
| • | the differential between the opening exchange rates and the period end exchanges rate applied on our opening cash and cash equivalents balance denominated in dollars; and |
| • | the foreign exchange rate impact of the conversion of the financial statements of our US subsidiaries. |