Question

If the british subsidiary of a european firm has net exposed assets of £250,000, and the euro increases in value from €1.50/£ to €1.40/£, the european firm has a translation ________.

Answer 1

Currency translation is the process of quoting the amount of money denominated in one currency in the denomination of another currency on a balance sheet. Currency translation is done using current exchange rates. So the european firm has a translation of

(£250,000 x €1.50/£) – (£250,000 x €1.40/£) = € 25000