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Translation of Financial Statements

Author

Listed:
  • Dalthan Simas

    (Universidade do Estado do Rio de Janeiro, Brazil)

  • Otavio De Medeiros

    (Universidade de Brasilia, Brazil)

Abstract

This paper has the purpose of surveying and critically analyzing the effects of accounting procedures which are closely related to groups of companies operating multinationally. These are the methods for translation of financial statements, e.g. the Temporal and the Closing- rate Methods, as far as those methods are embodied in accounting standards which have been either recommended or adopted by countries such as the UK and US. We conclude that with regard to changing prices, General Price Level Accounting is the best option. As for exchange rate fluctuations, the Closing Rate Method should be preferred over the Temporal Method, the order being owed to the greater relative importance of foreign operations which are carried out in an independent way, vis- à-vis those which are mere extensions of the parent company's. Costs may also have played a part towards the choice. However, the main conclusion that can be drawn is that convenience of use, for both the accounting profession and report users, seems to have been the determinant factor.

Suggested Citation

  • Dalthan Simas & Otavio De Medeiros, 2005. "Translation of Financial Statements," Finance 0503018, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0503018
    Note: Type of Document - pdf; pages: 25
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/fin/papers/0503/0503018.pdf
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    References listed on IDEAS

    as
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    2. Adler, Michael & Lehmann, Bruce, 1983. "Deviations from Purchasing Power Parity in the Long Run," Journal of Finance, American Finance Association, vol. 38(5), pages 1471-1487, December.
    3. Frederick D S Choi & Howard D Lowe & Reginald G Worthley, 1978. "Accountors, Accountants and Standard No. 8," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 9(2), pages 81-87, June.
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    More about this item

    Keywords

    financial statements; translation; international accounting; exchange rate;
    All these keywords.

    JEL classification:

    • G - Financial Economics

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