WORLD SCENE

PRONOUNCEMENT
AND
PRACTICES
IN SELECT COUNTRIES
 USA
For the purpose of translation foreign operation are classified
into two

1 The first category includes firm which are viewed as separate

from the parent firm known as foreign entities for such entities
the appropriate translation method is CLOSING RATE method
2 The second category includes foreign operations that are
integral to the operations of the parent for such firm the
appropriate translation method would be MONETORY/NON-
MONETORY method 
 All monetory items would be translated at CLOSING RATE
and
 All non monetory items at HISTORICAL RATE
 CANADA

 The current/non-current method acquired popularity in Canada in later

half of 1960s.
 In early 1970 the Current rate method began to receive acceptance
however due to protest by business communities a revised standard was
finally issuedin 1983
 The UNIQUE feature of this standard is classification of foreign
operations

1 The first category which includes self-sustaining operations for which

current rate method is adopted.
2 The second category includes integrated foreign subsidiaries whose
economic activities and cash flows have a direct imact on the Canadian
entity. The TEMPORIAL method of translation should be adopted for
such operations.
 AUSTRALIA

 Foreign operations is self-sustaining its financial statement

shall be translated at the balance sheet date using
CURRENT rate method

 On the other hand where a foreign operation is integrated

with the reporting entity its financial statement shall be
translated using TEMPORIAL method
 SWEDEN
 No legal provisions in Sweden to deal with foreign currency
translation problem

 The current rate method appears to be more popular with

companies for translating financial statement of subsidiaries
other than those located in high inflation economies in
which case the monetary/non-monetory method is used

 Acquisition 
1. All assets and liabilities have been translated at year end
rates
2. While equities have been translated at the rates prevailing
on the date of acquisition
 NORWAY
There is no statutory requirement with regards to the method
of translation to be followed
 A predominant practice however is the use of CURRENT
Rate Method 
 SOUTH AFRICA

 Many countries in Africa were under british influence so the

predominant practice is the Current/Non-current method, use
of modified current method is also visible Assets and
Liabilites are expressed at the rate of exchange ruling at the
year end.
 UNITED KINGDOMS
 Prior to II world war the Current/Non-current method of translation was
prevailed in UK on the other hand British companies that were quoted on
the New York Stock Exchange were required to adopt Temporal method

 Therefore Accounting Standard Committee was therefore placed in a

difficult situation later “Accounting for foreign currency translation” was
published in 1977 which primarily concerned itself with the use of
CLOSING RATE and TEMPORAL METHOD.

 Closing rate method:- when the foreign business carries on its activities as
a separate autonomous semi-independent unit the holding company will
not be involved in the day-to-day activities of the subsidiary company.

 Temporal method:- in situation where the overseas activities are carried on

as an extension of the home companies business and not independently.