Study Of Foreign Currency Translation Method

Foreign currency statement translation, which is primarily aimed at consolidated financial statement and the difficult point of which mainly focus on choosing the translation methodologies , is one of the most vexing and controversial technical issues in the international accounting. The four major methods that have been used historically in the translation process are the current/noncurrent, the monetary/nonmonetary , the temporal and the current rate methods among which the temporal and the current rate method are widely adopted. It has defied theoretical and practical solutions and will continue to be of great interest due to fluctuating currency markets and the globalization of business and the world's securities markets. Since the study of foreign currency statement translation in our country started very late, we have a lot of hard work to go.The article is divided into five parts. The first part look back the history of the translation methodologies, present and compare the translation methodologies recommended by six developed countries and the International Accounting Standards Committee(IASC).We can concluded that the temporal and the current rate methods are prevailing in the world. Three choices are available for our country: the temporal method, the current rate method, the temporal and the current rate methods both used.The second part is mainly focused on the theoretical evaluation of the temporal and the current rate methods. At the first, this part distinguishes between the temporal method and the current rate method in accounting process. Subsequently this part evaluates two methods by the accounting theories and the economic theories. I hold the opinion that the temporal method is theoretically more perfect than the current rate method.The third part clarified the unilateral evaluation towards the temporal method and the current rate method. the unilateral evaluation, the temporal methodreceived excessively criticizes and the current method does not deserve so much appraise, is the ultimate reason why the current method is widely used.The fourth part illustrates the temporal and current-rate methods that is adopted by FASB Statement 52 and the International Accounting Standards Committee. The most important discovery in this part is that the problems caused by using the temporal and current-rate methods are more sophisticated.The fifth part goes through the history of foreign currency translation in our country and analyses the economic environment of our country. Finally we can get the conclusion that the temporal method should be the unique foreign currency statement translation method in our country.