Translation Risk

Translation Risk

The risk of changes in the reported home currency accounting results of foreign operations due to changes in currency exchange rates.

Accounting Exposure

The risk that a company may suffer a reduction in value because a change in exchange rates reduces the value of its accounts or assets denominated in foreign currencies. That is, if a particular currency in which a company has some assets denominated decreases in value, the value of those assets also decreases with respect to the company's main currency. See also: Foreign exchange risk.
References in periodicals archive ?
Capital adequacy remains strong and one of the best in the sector, providing an additional buffer against rising credit risks, despite exposure to translation risk on the Bank's equity investments in foreign subsidiaries.
Observing that QNB's FSR remains somewhat pressured on liquidity (at its current very high level of 'AA-'); CI said while the rising exposure to country risk and foreign exchange translation risk on overseas subsidiaries and associates is also to some extent a constraint, all are self-funding and therefore "unlikely to exert significant downward pressure" on the FSR, unless the levels of cross-border exposure increase markedly.
One area companies are looking at is translation risk, which involves the effect of foreign exchange movements on a company's balance sheet as foreign business units' financials are translated into the parent company's functional currency.
The tools used to teach accounting and finance courses must specifically include devices which show the effects of foreign exchange transaction risk, foreign currency translation risk, and specific effects to financial statements of currency translations made over different time periods.
Crimson's translation risk management processes have received official Notified Body endorsement and are patent pending.
Translation Risk Transaction Risk: Transaction Denominated in a Foreign Currency Export Goods Import Goods Dollar Weakens Gain Loss Dollar Strengthens Loss Gain Translation Risk: Accounting Records Kept in a Foreign Currency Net Asset Position Net Liability Position Dollar Weakens Gain Loss Dollar Strengthens Loss Gain Exhibit 3 Rates and Formulas for Basic Consolidation Worksheet A B C D Subsidiary 1 Worksheet Uses the in Foreign Translation Rate 2 Current Rate Method# Currency Rate Amount 3 Cash# 5,000,000a C# =+B19b 4 Cash From Loan# 5 Accounts Receivable# 8,000a C# =+B19b 6 Land# 52,000,000a C# =+B19b 7 Invest.
Given that the dollar fell 13% against sterling last year coupled with an expected further 8% fall this year, currency translation risk will more than likely weigh on investors' minds when looking to invest in blue chip stocks.
Translation risk, reflected in other comprehensive income, was a low priority, as was economic risk.
Translation risk is the risk we incur when we hold assets or liabilities in a foreign currency.
Translation risk can lead to earnings from foreign subsidiaries contributing less to reported dollar earnings.
We feel we can successfully manage currency translation risk in Argentina and we are assuming that a reasonable level of economic activity is restored there during the year.
These gains and losses form translation risk and are represented as an adjustment to equity or earnings.
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