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.
