Translation of Financial Statements

25 Pages Posted: 2 Feb 2005

See all articles by Dalthan Medeiros Simas

Dalthan Medeiros Simas

Universidade do Estado do Rio de Janeiro

Otavio Ribeiro de Medeiros

University of Brasilia


This paper has the purpose of surveying and critically analyzing the effects of accounting procedures which are closely related to groups of companies operating multinationally. These are the methods for translation of financial statements, e.g. the Temporal and the Closing-rate Methods, as far as those methods are embodied in accounting standards which have been either recommended or adopted by countries such as the UK and US. We conclude that with regard to changing prices, General Price Level Accounting is the best option. As for exchange rate fluctuations, the Closing Rate Method should be preferred over the Temporal Method, the order being owed to the greater relative importance of foreign operations which are carried out in an independent way, vis-a-vis those which are mere extensions of the parent company's. Costs may also have played a part towards the choice. However, the main conclusion that can be drawn is that convenience of use, for both the accounting profession and report users, seems to have been the determinant factor.

Keywords: Financial statements, exchange rate, changing prices, accounting standards

JEL Classification: M41, M44, M47

Suggested Citation

Simas, Dalthan Medeiros and de Medeiros, Otavio Ribeiro, Translation of Financial Statements. Available at SSRN: or

Dalthan Medeiros Simas (Contact Author)

Universidade do Estado do Rio de Janeiro ( email )

Rio de Janeiro, 22030-000


Otavio Ribeiro De Medeiros

University of Brasilia ( email )

Campus Universitario Darcy Ribeiro
Gleba A - Reitoria
Brasilia, DF 70910-900


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