Foreign Currency Translation

S. J. Gray, L. G. Campbell and J. C. Shaw
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S. J. Gray: University of Glasgow
L. G. Campbell: Deloitte Haskins Sells
J. C. Shaw: Deloitte Haskins Sells

Chapter Chapter Seven in International Financial Reporting, 1984, pp 331-356 from Palgrave Macmillan

Abstract: Abstract The rising level of international trade and investment in recent years means that companies are becoming increasingly exposed to foreign exchange risks, arising from two distinct sources:- (a) foreign currency transactions (such as sales and purchases giving rise to debtors and creditors, or the lending and borrowing of funds), whose home currency value may fluctuate between the date the transaction occurred and the date of final settlement; and (b) foreign operations conducted through foreign subsidiaries, where the home currency value of assets and liabilities (recorded in the subsidiary’s book in a foreign currency) may fluctuate. The first source of foreign exchange risk (ie. at the individual entity stage) gives rise to several issues, namely what items (if any) should be retranslated at the balance sheet date if currency movements have occurred, whether exchange gains or losses on such retranslation should be taken to the income statement, and whether exchange gains or losses arising on final settlement of the transaction should be taken to the income statment.

Keywords: Foreign Currency; Foreign Subsidiary; Income Statement; International Account Standard; Final Settlement (search for similar items in EconPapers)
Date: 1984
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-07442-6_9

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DOI: 10.1007/978-1-349-07442-6_9

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