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Google's foreign currency translation risks

Please help assessing the risk to Google related to foreign currency translations, foreign economic events, and international financial reporting standard requirements in order to summarize the risk tolerance level for Google.

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International Risks

Google operates business at an international level, so foreign exchange risk management programs are needed to manage foreign transactions and risks. The company expands advertising programs and other products to international markets that increase its exposure to fluctuations in foreign currency to U.S. dollar exchange rates (Fight, 2004). For this, the company has a foreign exchange risk management program that is designed to reduce exposure to fluctuations in foreign currency exchange rates. At the same time, this program will not fully offset the effect of fluctuations on revenues and earnings.

Foreign Currency Translations

The functional currency of international subsidiaries is the local currency. Google translates the financial statements of these subsidiaries to U.S. dollars by using month-end rates of exchange for assets and liabilities. In addition, it charges average rates of exchange for revenues, costs, and expenses. The company recorded $77 million of net translation gains in 2009, $124 million of net translation losses in 2010, and $107 million of net translation losses in ...

Solution Summary

The expert examines Google's foreign currency translation risks. The financial reporting standard requirements are determined.

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