Translation exposure and Valuation inputs: Difference between pages

From ACT Wiki
(Difference between pages)
Jump to navigationJump to search
imported>Doug Williamson
(Add links.)
 
imported>Doug Williamson
(Classify page.)
 
Line 1: Line 1:
''Foreign exchange risk''.
The assumptions that market participants use when valuing an asset or liability, including assumptions about risk, such as the following:


Translation exposure refers to foreign exchange or currency risk. It is the risk of adverse effects in a firm’s reported financial statements, or related financial ratios or borrowing covenant compliance, resulting from changes in the rates at which foreign currency-denominated assets, liabilities, income or costs are translated into the reporting currency.
#The risk inherent in a particular valuation technique used to measure fair value (such as a pricing model).
#The risk inherent in the inputs to the valuation technique.  


This applies most commonly to the translation of monetary assets and liabilities and to the consolidation of non-domestic subsidiaries into group financial statements.


If the changes in exchange rates were to reverse, the effects on the related amounts in the financial statements would normally also reverse.
Valuation inputs may be observable or unobservable.




Also known as translation risk, translational risk or translational exposure.
==See also==
*[[Fair value]]
*[[IFRS 13]]
*[[Observable valuation inputs]]
*[[Unobservable valuation inputs]]


 
[[Category:Accounting,_tax_and_regulation]]
== See also ==
* [[Accounting exposure]]
* [[Balance sheet exposure]]
* [[Convert]]
* [[Currency risk]]
* [[Current/non-current method]]
* [[Economic exposure]]
* [[Foreign exchange risk]]
* [[Income statement exposure]]
* [[Transaction exposure]]
* [[Translate]]
 
 
==Other resource==
[http://www.treasurers.org/node/9528 Treasury essentials: Translation Risk, Will Spinney, The Treasurer, Nov 2013]
 
[[Category:Manage_risks]]

Revision as of 20:12, 27 June 2022

The assumptions that market participants use when valuing an asset or liability, including assumptions about risk, such as the following:

  1. The risk inherent in a particular valuation technique used to measure fair value (such as a pricing model).
  2. The risk inherent in the inputs to the valuation technique.


Valuation inputs may be observable or unobservable.


See also

Retrieved from ‘https://wiki.treasurers.org/w/index.php?title=Translation_exposure&oldid=50027’