Problem

Foreign currency manipulations in accounting records of transnational corporations

Nature:
For the purpose of preparing consolidated statements, the financial statements of foreign subsidiaries expressed in terms of the various host countries' currencies need to be translated into the currency of the parent company. At a time when exchange rates are subject to substantial fluctuations, the method of translation can significantly affect the results. The simplest method, which is still widely used by companies in western Europe, is the application of the closing rate to all items in the subsidiaries' financial statements. More sophisticated methods involve the use of different rates for the translation of different items.
Problem Type:
E: Emanations of other problems
Date of last update
01.01.2000 – 00:00 CET