The Study On The Evaluation And Improvement Of The Translation Methods Of Foreign Currency Statements

In many countries the translation methods of foreign currency statements are usually selected only according to a concept, but not a whole conceptual system. In China only the current rate method is allowed in current operation, while it can't fit in with the current accounting practice. In order to set up the appropriate and advanced translation principle, the whole construction of the translation of foreign currency statements should be taken into our consideration. In this article, the new conceptual framework of translation methods is put forward on the basis of the studies on the history of translation methods in west countries and the analysis of circumstances of translation, and then we value the present accounting practice. At last some suggestions are raised to improve it.Firstly we introduce the history and the present situation of translation of foreign currency statements. Its history in west countries goes through 3 stages. In current translation of foreign currency statements, different methods are selected in different countries.The second part analyze the circumstances of translation of foreign currency statements, including the operating nature of foreign subsidiaries, the accounting principles, the range of the prices movement, the accounting targets, the real influence on the accounting items by the exchange fluctuation, and the exchange control.In the third part referring to the conceptual framework in the financial accounting, we set up the conceptual framework of the translation of foreign currency statements on the basis of the accounting circumstances. Firstly we discuss the translating circumstances. Secondly we introduce the translating assumption and translating targets. Thirdly the translating principles, the qualitative nature of the translated information, the translating objects and the translating reports are discussed. Finally we analyze the translating process and translating methods.In the fourth part we value the current translation method according to the new constructed framework. But we find that both the current rate method and the temporal method have some limitations. The current rate method doesn't fit in with our circumstances.At last some suggestions are put forward. The current rate method should be the main method internationally; the simultaneous adoption of temporal method and current rate method is our best choice in China; all items of foreign currency statements are translated by current rate according to the current rate method; all items of foreign currency statements are translated by historical rate according to the temporal rate method; historical cost should be replaced by current cost.