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Exchange Rate Fluctuations and Translation methods

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Other than the exchange rate fluctuations, what risks do you think impact multinationals today as the world attempts to pull out of the current recession?

The translation methods allowed under FAS No. 52 is current rate method and temporal method. How are they different? Which is better? Should there be more than one and why?

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Other than the exchange rate fluctuations, what risks do you think impact multinationals today as the world attempts to pull out of the current recession?

There are two risks that I think multinationals face in pulling out of the recession, transportation risk and political instability. Transportation risk is the cost or trouble of getting goods from one area to another area across the globe, including products or workers. Fuel prices are dependent on oil costs and those can be volatile. Some firms, mostly airlines, hedge against fuel costs since it is such a large ingredient, but all firms with a tangible product have this exposure, not just for the product but also for travel of employees. Another risk is the political risk which impacts both access to labor pools but also ...

Solution Summary

Your tutorial is 487 words and a reference and gives two major risks of multinationals and agrees that two currency translation methods are useful.

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Compare and contrast the four currency translation methods. Which two methods are used by FASB 52? Be sure to discuss the two step method used in FASB 52 and how highly inflationary economies (around 100% inflation in a three year period) are handled. Discuss how Japan and Germany approach the translation of currency.

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