1、中文 5325 字 本科毕业论文（设计） 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 issu
2、es in accounting. It has defied theoretical and practical solutions and will continue to be of great interest due to fluctuating currency markets and the globalization of business and the worlds securities markets. Translation is the process of restating financial statement information from one curr
3、ency to another. It is 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 another(i.e., the parent countrys) currency. Many of its
4、 problems stem from the fact that foreign exchange rates are seldom fixed. Variable exchange rates, combined with the variety of translation methods that can be used and different treatments of translation gains and losses, make it difficult to compare financial results from one company to another,
5、or in the same company from one period to the next. In these circumstances, it becomes a challenge for multinational enterprises to make informative disclosures of operating results and financial position. Financial analysts and others find that interpreting such information can also be quite challe
6、nging. The troubles extend to evaluating managerial performance. Companies operating internationally use a variety of methods to express, in terms of their domestic currency, the assets, liabilities, revenues, and expenses that are stated in a foreign currency. These translation methods can be class
7、ified into two types: those that use a single translation rate to restate foreign balances to their domestic currency equivalents and those that use 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
8、foreign currency assets and liabilities. Foreign currency revenues and expenses are generally translated at exchange rates prevailing when these items are recognized. For convenience, however, these items are typically translated by an appropriately weighted average of current exchange rates for the
9、 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 preser
10、ve 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 whose results go into the consolid
11、ated 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 purpose of consolidated financial statements. For accounting purposes, a foreign currency asset or liability is said to be
12、 exposed to exchange rate risk if a change in the exchange rate causes its parent currency equivalent to change. Given this definition, the current rate method presumes that all local currency assets are exposed to exchange risk as the current (versus the historical) rate changes the parent currency
13、 equivalent of a foreign currency balance every time exchange rates change. This seldom happens, however, as inventory and fixed asset values are generally supported by local inflation. Consider the following example. Suppose that a foreign affiliate of a U.S. multinational corporation (MNC) buys a
14、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 rises in value to FC 1500000(unrecognized under U.S. GAAP) while the exchange rate declines to FC
15、1.4=$1 by periods end. If this foreign currency asset 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. Yet the increase in the fair market value of the land indicates that its current
16、value in U.S. dollars is really $1071285. This suggests that translated asset values make little sense 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 resembles neither historical co
17、st nor current market value. Finally, translating all foreign currency balances by the current rate creates translation gains and losses every time exchange rates change. Reflecting such exchange adjustments in current income could significantly distort reported measures of performance. Many of thes
18、e gains and losses may never be fully realized, as changes in exchange rates often reverse 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 sub
19、sidiarys current assets and current liabilities are translated into their parent companys reporting currency at the current rate. Noncurrent assets and liabilities are translated at historical rates. Income statement items (except for depreciation and amortization changes) are translated at average
20、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 assets were acquired. Unfortunately, this method makes little economic sense. Using the year-end rate to translate current assets implies that foreign currency cash, receivables, and
