Foreign Currency Translations May Cause Erratic Equity Positions

Abstract

Financial Accounting Standards Board Statement No. 52 (FASB 52) replaced FASB 8 in 1981 and the new guidelines have been accepted widely for providing noncontroversial and adequate disclosure of foreign currency matters.  The nine years since the adoption of FAS 52 have seen erratically fluctuating exchange rates, however, and the equity positions of many firms have responded accordingly.  This article provides an investigation into the erratic equity positions that may have been caused by the new guidelines, and recommends actions that may avoid future embarrassments for the accounting profession.