Current Rate Method

AAA

DEFINITION of 'Current Rate Method'

A method of foreign currency translation where most items in the financial statements are translated at the current exchange rate. The exception would be income statements items, which are translated at actual exchange rates.

This method of is the most widely used currency translation method.

INVESTOPEDIA EXPLAINS 'Current Rate Method'

The gains and losses associated with this translation are reported on a reserve account instead of the consolidated net income account. This helps to reduce the volatility of consolidated earnings. It is also more helpful for management, shareholders and creditors in evaluating a company because losses and gains resulting from the exchange rate are excluded for the consolidate earnings.

RELATED TERMS
  1. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  2. Volatility

    1. A statistical measure of the dispersion of returns for a given ...
  3. Net Income - NI

    1. A company's total earnings (or profit). Net income is calculated ...
  4. Temporal Method

    A method of foreign currency translation that uses exchange rates ...
  5. Consolidated Financial Statements

    The combined financial statements of a parent company and its ...
  6. Translation Risk

    The exchange rate risk associated with companies that deal in ...
RELATED FAQS
  1. Are domestic and foreign subsidiaries included on a company's financial statements?

    A subsidiary is a company that is controlled by another 'parent' company. The subsidiary acts and operates like its own entity ... Read Full Answer >>
  2. How are foreign exchange rates affected by commodity price fluctuations?

    In the foreign exchange (forex) market, currency valuations move up and down as a result of many factors, including interest ... Read Full Answer >>
  3. What Book Value Of Equity Per Share (BVPS) ratio indicates a buy signal?

    Book value of equity per share (BVPS) is a ratio used in fundamental analysis to compare the amount of a company's shareholders' ... Read Full Answer >>
  4. What does an unfavorable variance indicate to management?

    In managerial accounting, an unfavorable variance is discovered when a company's management performs a comparison between ... Read Full Answer >>
  5. Is there a way to include intangible assets in book-to-market ratio calculations?

    The book-to-market ratio is used in fundamental analysis to identify whether a company's securities are overvalued or undervalued. ... Read Full Answer >>
  6. When is market to market accounting performed?

    Mark to market accounting is used for substantially all investments or financial instruments held on a corporation's balance ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Inventory Valuation For Investors: FIFO And LIFO

    We go over these methods of calculating this component of the balance sheet, and how the choice affects the bottom line.
  2. Options & Futures

    A Primer On The Forex Market

    Moving from equities to currencies requires you to adjust how you interpret quotes, margin, spreads and rollovers.
  3. Investing Basics

    Calculating Unlevered Free Cash Flow

    Unlevered free cash flow (UFCF) is the free cash flow of a business before interest payments.
  4. Economics

    What are Capital Goods?

    Capital goods are assets with a useful life of more than one year that are used for the production of income.
  5. Economics

    Understanding Capital Assets

    A capital asset is one that a company plans on owning for more than one year, and uses in the production of revenue.
  6. Fundamental Analysis

    What is Year-to-Date?

    Year-to-date (YTD) is a term that describes financial results from the beginning of the current year up to the day the financial number is reported.
  7. Investing Basics

    Explaining Net Tangible Assets

    Net tangible assets is a company’s total assets subtracting both intangible assets (such as goodwill and intellectual property) and total liabilities.
  8. Economics

    What is Managerial Accounting?

    Managerial accounting is internally-based accounting that helps managers measure the results of their decisions.
  9. Investing Basics

    Understanding Long-Term Debt

    Long-term debt is any debt or liability that is due in more than one year.
  10. Economics

    How Do Accountants Use the Equity Method?

    The equity method is an accounting technique used by firms to assess the profits earned by their investments in other companies.

You May Also Like

Hot Definitions
  1. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  2. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  3. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  4. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  5. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  6. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!