Translation Exposure


DEFINITION of 'Translation Exposure'

The risk that a company's equities, assets, liabilities or income will change in value as a result of exchange rate changes. This occurs when a firm denominates a portion of its equities, assets, liabilities or income in a foreign currency.

Also known as "accounting exposure".

BREAKING DOWN 'Translation Exposure'

Accountants use various methods to insulate firms from these types of risks, such as consolidation techniques for the firm's financial statements and the use of the most effective cost accounting evaluation procedures. In many cases, this exposure will be recorded in the financial statements as an exchange rate gain (or loss).

  1. Equity

    Equity is the value of an asset less the value of all liabilities ...
  2. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  3. Income

    Money that an individual or business receives in exchange for ...
  4. Cumulative Translation Adjustment ...

    An entry in the comprehensive income section of a translated ...
  5. Generally Accepted Accounting Principles ...

    The common set of accounting principles, standards and procedures ...
  6. Liability

    A company's legal debts or obligations that arise during the ...
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