The Value Relevance of the Foreign Translation Adjustment

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30 Scopus citations

Abstract

The study presents an economic analysis of the foreign translation adjustment and empirically examines the association between change in firm value and the foreign translation adjustment for a sample of manufacturing firms. The study shows that, for firms in the manufacturing sector, the translation adjustment is associated with a loss of value instead of an increase in value. This result stems from the fact that, for firms in the manufacturing sector, the accounting rules governing foreign currency translations generally produce results opposite to the economic effects of exchange rate changes.

Original languageEnglish (US)
Pages (from-to)1027-1047
Number of pages21
JournalAccounting Review
Volume78
Issue number4
DOIs
StatePublished - Oct 2003

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

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