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Translation of Financial Statements


  • Dalthan Simas

    (Universidade do Estado do Rio de Janeiro, Brazil)

  • Otavio De Medeiros

    (Universidade de Brasilia, Brazil)


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, EconWPA.
  • Handle: RePEc:wpa:wuwpfi:0503018
    Note: Type of Document - pdf; pages: 25

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    References listed on IDEAS

    1. Chen, Al Y. S. & Comiskey, Eugene E. & Mulford, Charles W., 1990. "Foreign currency translation and analyst forecast dispersion: Examining the effects of statement of financial accounting standards no. 52," Journal of Accounting and Public Policy, Elsevier, vol. 9(4), pages 239-256.
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    More about this item


    financial statements; translation; international accounting; exchange rate;

    JEL classification:

    • G - Financial Economics

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