本科毕业论文（设计）
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外文翻译
外文题目Foreign currency translation
外文出处International Accounting (4th Edition) [M].
Prentice Hall, 2002. 235-241.
外文作者Frederick D. Choi, Gary K. Meek.
原文：
Foreign currency translation
Foreign currency translation is one of the most vexing and controversial technical issues in accounting. It has defied theoretical and practical solutions and will continue to be of great interest due to fluctuating currency markets a nd the globalization of business and the world’s curities markets.
Translation is the process of restating financial statement information from one currency to another. It is 闯红灯查询
浙大录取分数线necessary whenever a company with operations in more than one country prepares consolidated(or group) financial statements that combine financial accounts denominated in one national currency with accounts denominated in , the parent country’s) currency. Many of its problems stem from the fact that foreign exchange rates are ldom fixed. V ariable exchange rates, combined with the variety of translation methods that can be ud and different treatments of translation gains and loss, make it difficult to compare financial results from one company to another, or in the same company from one period to the next. In the circumstances, it becomes a challenge for multinational enterpris to make informative disclosures of operating results and financial position. Financial analysts and others find that interpreting such information can also be quite challenging. The troubles extend to evaluating managerial performance.
Companies operating internationally u a variety of methods to express, in terms of their domestic currency, the asts, liabilities, revenues, and expens that are
stated in a foreign currency. The translation methods can be classified into two types: tho that u a single translation rate to restate foreign balances to their domestic currency equivalents and tho that u multiple rates.
Single rate method
The single rate method, long popular in Europe, applies a single exchange rate, the current or closing rate, to all foreign currency asts and liabilities. Foreign currency revenues and expens are generally translated at exchange rates prevailing when the items are recognized.
For convenience, however, the items are typically translated by an appropriately weighted average of current exchange rates for the period. Under this method, the financial statements of a foreign operation (viewed by the parent as an autonomous entity) have their own reporting domicile: the local currency environment in which the foreign affiliate does business.
Under the current rate method, the consolidated statements prerve the original financial statement relationships (such as financial ratios) of the individual entities as all foreign currency financial statement items are translated by a single rate. That is, consolidated results reflect the currency perspectives of each entity who results go into the consolidated totals, not the single-currency perspective of the parent company. Some people fault this method on the grounds that using multiple currency perspectives violates the basic purpo of consolidated financial statements.
For accounting purpos, a foreign currency ast or liability is said to be expod to exchange rate risk if a change in the exchange rate caus its parent currency equivalent to change. Given this defi
班务工作总结nition, the current rate method presumes that all local currency asts are expod to exchange risk as the current (versus the historical) rate changes the parent currency equivalent of a foreign currency balance every time exchange rates change. This ldom happens, however, as inventory and fixed ast values are generally supported by local inflation.
Consider the following example. Suppo that a foreign affiliate of a U.S. multinational corporation (MNC) buys a tract of land at the beginning of the period for FC1000000. The exchange rate (historical rate) was FC1=$1. Thus, the historical
cost of the investment in dollars is $1000000. Due to inflation, the land ris in value to FC 1500000(unrecognized under U.S. GAAP) while the exchange rate declines to FC1.4=$1 by period’s end. If this foreign currency ast were translated to U.S. dollars using the current rate, its original dollar value of $1000000 would now be recorded at $714286 implying an exchange loss of $285714. Y et the increa in the fair market value of the land indicates that its current value in U.S. dollars is really $1071285. This suggests that translated ast values make little n without making local price level adjustments first. Also, translation of a historical cost number by a current market-determined exchange rate produces a result that rembles neither historical cost nor current market value.
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Finally, translating all foreign currency balances by the current rate creates translation gains and loss every time exchange rates change. Reflecting such exchange adjustments in current income could significantly distort reported measures of performance. Many of the gains and loss may never be fully realized, as changes in exchange rates often rever direction.
Multiple rate methods
Multiple rate methods combine the current and historical exchange rates in the translation process.
Current-noncurrent method
Under the current-noncurrent method, a foreign subsidiary’s current asts and current liabilities are translated into their parent company’s reporting currency at the current rate. Noncurrent asts and liabilities are translated at historical rates. Income statement items (except for depreciation and amortization changes) are translated at average rates applicable to each month of operation or on the basis of weighted averages covering the whole period being reported. Depreciation and amortization changes are translated at the historical rates in effect when the related asts were acquired.
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Unfortunately, this method makes little economic n. Using the year-end rate to translate current asts implies that foreign currency cash, receivables, and inventories are equally expod to exchange risk. This is simply not true. For example,
if the local price of inventory can be incread after a devaluation, its value is protected from currency exchange risk. On the other hand, translation of long-term debt at the historical rate shifts the impact of fluctuating currencies to the year of ttlement. Many consider this to be at odds with reality. Moreover, current and noncurrent definitions are merely a classification scheme, not a conceptual justification of which rates to u in translation.
Monetary-nonmonetary method
The monetary-nonmonetary method also us a balance sheet classification scheme to determine appropriate translation rates. Monetary asts and liabilities are translated at the current rate. Nonmonetary items—fixed asts, long-term investments, and inventories---are translated at historical rates. Income statement items are translated under procedures similar to tho described for the current-noncurrent framework.
Unlike the current-noncurrent method, this method views monetary asts and liabilities as expod
to exchange rate risk. Since monetary items are ttled in cash, u of the current rate to translate the items produces domestic currency equivalents that reflect their realizable or ttlement values. It also reflects changes in the domestic currency equivalent of long-term debt in the period in which they occur, producing a more timely indicator of exchange rate effects.
Note, however, that the monetary-nonmonetary method relies on a classification scheme to determine appropriate translation rates. This may lead to inappropriate results. For example, this method translates all nonmonetary asts at historical rates, which is not reasonable for asts stated at current market values (such as investment curities and inventory and fixed asts written down to market). Multiplying the current market value of a nonmonetary ast by a historical exchange rate yields an amount in the domestic currency that is neither the item’s current equivalent nor its historical cost. This method also distorts profit margins by matching sales at current prices and translation rates against cost of sales measured at historical costs and translation rates.
Temporal method
With the temporal method, currency translation is a measurement conversion process or a restatement of a given value. It does not change the attribute of an item being measured; it only cha
nges the unit of measure. Translation of foreign balances restates the currency denomination of the items, but not their actual valuation. Under U.S. GAAP, cash is measured in terms of the amount owned at the balance sheet date. Receivables and payables are stated at amounts expected to be received or paid when due. Other asts and liabilities are measured at money prices that prevailed when the items were acquired or incurred (historical prices). Some, however, are measured at prices prevailing as of the financial statement date (current prices), such as inventories under the lower of cost or market rule. In short, a time dimension is associated with the money values.
In the temporal method, monetary items such as cash, receivables, and payables are translated at the current rate. Nonmonetary items are translated at rates that prerve their original measurement bas. Specifically, asts carried on the foreign currency statements at historical cost are translated at the historical rate. Why? Becau historical cost in foreign currency translated by a historical exchange rate yields historical cost in domestic currency. Similarly, nonmonetary items carried abroad at current values are translated at the current rate becau current value in foreign currency translated by a current exchange rate produces current value in domestic currency. Revenue and expen items are translated at rates that prevailed when the underlying transactions took place, although average rates are suggested when revenue or expen transactions are voluminous.
When nonmonetary items abroad are valued at historical cost, the translation procedures resulting from the temporal method are virtually identical to tho produced by the monetary-nonmonetary method. The two translation methods differ only if other ast valuation bas are employed, such as replacement cost, market values, or discounted cash flows.
墙裙装修效果图全球最帅Becau it is similar to the monetary-nonmonetary method, the temporal method shares most of its advantages and disadvantages. In deliberately ignoring local inflation, this method shares a limitation with the other translation methods discusd.
