Current rate method

Current rate method

The translation of all foreign currency balance sheet and income statement items at the current exchange rate.

Current Rate Method

On a balance sheet, a way to recognize all expenses and revenues made in a foreign currency by translating them according to their spot exchange rate. The current rate method, while technically correct, makes financial statements more difficult to compile and evaluate because of the fluctuations in exchange rates that inevitably occur. See also: Constant currencies, Foreign currency translation.
References in periodicals archive ?
The current rate method is undeniably useful for the translation of financial statements based on current values or pricelevel adjusted accounting measures.
The current rate method, as defined here, translates all accounts at the current rate and includes the translation gain or loss in income.
Net translation impacts other comprehensive income under the current rate method and the income statement directly under remeasurement.
The new pronouncement requires the use of the current rate method and the exclusion of translation adjustments from income when a foreign subsidiary uses a foreign currency as its functional currency.
In general, appreciation (depreciation) of the local currency results in an increase (decrease) in the book value of net assets under the current rate method and a positive (negative) foreign translation adjustment, suggesting an increase (decrease) in firm value.
While it requires different translation methods in various circumstances, financial statements of most typical parent-foreign subsidiary arrangements are translated using the current rate method.
When the functional currency is the foreign currency, the current rate method is the approach mandated by SFAS 52.

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