TeachMeFinance.com - explain Foreign currency translation effects
Foreign currency translation effects
Gains or losses resulting from the process of expressing amounts denominated or measured in one currency in terms of another currency by use of the exchange rate between the two currencies. This process is generally required to consolidate the financial statements of foreign affiliates into the total company financial statements and to recognize the conversion of foreign currency or the settlement of a receivable or payable denominated in foreign currency at a rate different from that at which the item is recorded. Translation adjustments are not included in determining net income, but are disclosed as separate components of consolidated equity.
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