Haimo Technology’s Foreign Currency Report Conversion Study

With the acceleration of globalization and the rapid development of network information technology,more and more domestic companies have chosen to set up branches overseas to allocate resources more rationally to meet the challenges of globalization.This has promoted the development of multinational corporations in China.The conversion of foreign currency statements is an important part of the financial management of multinational corporations.The key to the translation of foreign currency statements lies in the choice of translation methods.Therefore,a reasonable choice of foreign currency statement translation methods is particularly important for multinational corporations.This paper first introduces and evaluates four basic foreign currency statement translation methods: current and non-current project method,monetary and non-monetary item method,temporal method,and current exchange rate method.It finds current and non-current project method and monetary and non-monetary item method has already been eliminated.Because the above two methods did not recognize the essence of the statement conversion.Therefore,the disputes about the conversion method of foreign currency statements mainly exist between the temporal method and the current exchange rate method.Then the paper analyzes the conversion method based on the theory of Accounting measurement,the theory of Consolidated statements and the theory of Purchasing power parity,and finds that the temporal method has more theoretical support than the current exchange rate method.After discussing the method of foreign currency report convert and its theoretical basis,this paper selects Haimo Technology as the research object and analyzes the status of the translation of foreign currency statements.At present,China’s guidelines stipulate the use of the current exchange rate method for conversion of foreign currency statements.The analysis can only be carried out from the current exchange rate method.After analysis,it has been found that the current exchange rate method ignores the measurement attributes of each item of the statements,resulting in the loss of economic significance of certain statement items after conversion,and the risk of conversion risks faced by the company is also large.It cannot fully reflect the operating status of overseas subsidiaries.Later,using the temporal method to translate the statements of Haimo Technology,it was found that although the temporal method selects the exchange rate according to the measurement attributes of each item,But it directly include the translation difference in the profits,making the profitability of the report more difficult to control.Not conducive to the use of report audiences;Finally,based on the temporal method,we propose a new method—improved temporal method.After using the improved temporal method to translate Haimo’s foreign currency report,we find that the improved temporal method not only considers the complete measurement attributes of the report items,and also overcome the shortcomings of the change of the report operating results by the temporal method,eliminating the adverse economic impact of the above two methods.So,the improved temporal method is better than the current exchange rate method and the temporal method.Therefore,this paper believes that the improved temporal method should be the future choice of the foreign currency statement translation method in China.