Share
Explore BrainMass

Exchange Rate Fluctuations and Translation methods

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?

Solution Preview

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.

$2.19