How to Translate Foreign Currency on Financial Statements?
By: Rabia Tanveer
Translating foreign currency on financial statements can be a pain. They take too much time, and most of the time you are working on them is spent banging on your head on your desk. However, it is not that difficult if you know what you are doing. The best way to approach this would be by hiring a translation service provider to handle it for you, but if you really want to torture yourself, you can use the following method to translate the foreign currency on your financial statement.
Finding the best way to approach your financial statement is very important and it is not for the faint of hearts. Things can escalate from “this is difficult” to “what of Monster does this?!” so be prepared to spend a few hours on it, at least.
- Identify the currency you are converting. Because how else are you going to translate it? So this is your first step. This will probably be the best time to use Google.
- After that you will have to choose a currency translation method. And, you guessed it, there are several types of methods that a person can use. They are CBR (currency of books and records), Temporary Rate Method and Monetary Method.
- Determine the currency that is used majorly for the company’s transactions. In technical terms, it is called the functional currency.
- The reporting currency is the one you are translating. So the second step is converting that currency into the functional currency.
- The last part: measure the losses and gains in the converted form. Isn’t this fun!
This is not as easy as many believe it to be. There are a lot of things that must be considered when financial statements are made, especially when they require foreign currency translation. You will have to mention everything, like the liquid assets, losses, profits, gain and even any debts. All in all, this will take a good few hours.
However, if you hire a professional translation services provider, you will save yourself from the heartburn it will give you. Such companies have trained professionals who can actually translate it in a couple of hours because they are used to it. The companies who provide business translation and legal translation services will be your best option because they will have more experienced people handling their projects.
Be smart my friend, and choose a company to do this work for you.