“Current rate method (of translation)”


The financial concept of current rate method, also known as currency translation method, refers to the standards defined in a company to translate the items of its financial statements nominated in foreign currency into their functional currency at the current exchange rate.

That translation results in gains and losses that get reported on a reserved account, other than the consolidated net income account to diminish the impact of FX volatility in the consolidated earnings.

This account provides insight on the company’s financial situation to the management, shareholders and creditors.

For more info read “Translation risk.”