Foreign Operation Issue in Accounting View
ISSUE : 2 * Currency issue in foreign operations.
Currency issue in foreign operations was arise since 1891 when it faces by an accountant in UK when they had realise that the issue underlying the identification of a foreign currency in accounting treatment problem and so many criticism about the development of a solution towards this problem. A development of the solution towards this problem has developed on 19th century, at the first regulators show that the foreign currency translation method which are treated as separate method can be traced to one common method, on 1960s this method has replaced by others solution by accounting practices and all of the solution has experience by so many problem that will arise issue in foreign currency operation in accounting treatment.
Based on Dukes (1978), there have two questions that being a problem in any method for the translation of the financial statement of foreign business operations. It consist of, (i) How foreign currency in financial statements shall be translated and in what exchange rate are to be used for different asset, liabilities, and equity accounts? (ii) How and when foreign exchange gains or losses shall be recognized?
These two questions are based on the assumption that financial statements can be used to identify the extent to which foreign business operations is exposed of the gain and any possibility of loss from foreign exchange rate movements.
The problem in the first question involves an assessment of the risk in the possibility of loss from specific asset and liability balances which was designated in foreign currency. The decision in accounting treatment to re-translate asset and liability balances follow by exchanged rate fluctuations which assume that the movement in exchanged rates are significant measure to evaluate the balances of asset and liability value of foreign business operations. Otherwise the decision not to re-translate the value of asset and liability balances
Currency issue in foreign operations was arise since 1891 when it faces by an accountant in UK when they had realise that the issue underlying the identification of a foreign currency in accounting treatment problem and so many criticism about the development of a solution towards this problem. A development of the solution towards this problem has developed on 19th century, at the first regulators show that the foreign currency translation method which are treated as separate method can be traced to one common method, on 1960s this method has replaced by others solution by accounting practices and all of the solution has experience by so many problem that will arise issue in foreign currency operation in accounting treatment.
Based on Dukes (1978), there have two questions that being a problem in any method for the translation of the financial statement of foreign business operations. It consist of, (i) How foreign currency in financial statements shall be translated and in what exchange rate are to be used for different asset, liabilities, and equity accounts? (ii) How and when foreign exchange gains or losses shall be recognized?
These two questions are based on the assumption that financial statements can be used to identify the extent to which foreign business operations is exposed of the gain and any possibility of loss from foreign exchange rate movements.
The problem in the first question involves an assessment of the risk in the possibility of loss from specific asset and liability balances which was designated in foreign currency. The decision in accounting treatment to re-translate asset and liability balances follow by exchanged rate fluctuations which assume that the movement in exchanged rates are significant measure to evaluate the balances of asset and liability value of foreign business operations. Otherwise the decision not to re-translate the value of asset and liability balances