Definicja current-rate method

Co znaczy CURRENT-RATE METHOD:

A method of currency translation.

This method distinguishes between the "straight current-rate method" and the "modified current-rate method":

Straight current-rate method

All balance sheet and income statement item amounts denominated in foreign currency are translated into group currency as per the closing reporting date using the exchange rate valid on that date.

Since this a straight translation of values from one currency to another, there are no currency translation differences.

Because of the uniform translation using the current exchange rate, the structures of the balance sheets and income statements of the consolidated individual statements remain unchanged.

Modified current-rate method

There are several forms of the modified current-rate method. The most recommended modified method is where the income statement is viewed as a time period statement and is not translated using the current rate but rather using the rate valid at the time the transaction took place or - to avoid complexity - using an average rate on a yearly, quarterly or monthly basis.

Another modified method involves the translation of equity values: Instead of translating stockholders' equity with the current exchange rate, historical exchange rates can be used.