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".
Investopedia explains '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).