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Foreign Currency Financial Reporting from Euro to Yen to Yuan: A Guide to Fundamental Concepts and Practical Applications


"Corporate financial reporting is very complex when multiple currencies are involved. To manage the complexities, you'll need Robert Rowan's Foreign Currency Financial Reporting from Euro to Yen to Yuan. Its clear and complete explanations of key concepts and practices make it a must-read for financial managers in companies that participate in the global economy."—Bruce Pounder, CMA, CFM, DipIFR (ACCA) President, Leveraged Logic; author of the Convergence Guidebook for Corporate Financial Reporting

"This book demystifies foreign currency and explains the important concepts in plain English. The book is practical and provides you with the solid foundation you need to gain a better understanding of foreign exchange. And although the book is what you need if you are responsible for financial reporting within a global company, it's more than that . . . irrespective of your position, if you do work for a company with international business dealings and you want to better understand the implications of foreign exchange movements on the company's financials, or if you just want to prepare to travel internationally and be able to quickly and confidently perform currency conversions . . . this book is for you." —Pamela Heye, CPA, former VP, Treasury and Risk Management, Sensus Metering Systems

ROBERT ROWAN, CPA, CITP, is an International Finance Controller at SAS, the world's largest privately held software company. He engages in subsidiary and holding company financial transactions, reviews GAAP and IFRS accounting issues, and conducts financial consolidation and reporting. Previously at SAS, he worked in the SAS Research and Development Division designing and developing the SAS Financial Management product. Prior experience includes positions at a Fortune 500 publicly listed company, a global chemical manufacturer with eighty subsidiaries, a private international software company as part of the initial public offering team, and Ernst & Young LLP.



Introduction to Foreign Currency and Exchange Rates.

Who You Are.

What You Know.

A Changing Environment.

Certainty in Uncertain Times.


Part I: The Basics.

Chapter 1: Isn't Currency Conversion Just Multiplication?


The First Complication: It's Not Just Multiplication.

From Where Do Exchange Rates Come?

The Market.

A Second Complication: Triangulation.

Triangulation with Cross Rates.


Currencies and Exchange Rates: Highlights of Their Relevance and Recent History.

Burgers and Currency.


Chapter 2: Exchange Rate Tables.

Getting from Yen to Euros without Losing Your Way.

The Foundation and Caveats.

Terms and Terminology.

Triangulation and Cross Rates – Redux.

Exchange Rate Tables.

Keep It Simple.


Chapter 3: Approximation.

When Mathematics, Computer Science, and Regulations Converge.

The Original Data: Accurate and Precise.

Significant Digits and Scientific Notation.



What Division Means for Computers.

Single Precision and Double Precision Floating Point.

Accuracy, Precision, and Credibility.


Part II: Key Concepts and Authoritative Standards.

Chapter 4: What's in a Name?


A Brief Background.

IFRS Predominance with an FASB Pedigree.

The Economic Essence: From Names to Definitions.

Functional Currency.

All the Rest.

A Foundation.


Chapter 5: The Gold Standard.

Following the Standard for Fiat Currencies.

The Gold Standard for Financial Reporting.

IAS21 and ASC 830: Converged, But Not Identical.

Translation Overview.

Translation – Not Conversion.

Translation of Income and Expense.


Simple Translation.

Translation 1: Basic.

Translation 2: Intermediate.

Convenience Translation.

The Standard.


Chapter 6: They're Not Synonyms.

Transaction to Translation, Revaluation to Remeasurement.

Transactions and Translation.

Transactions in a Foreign Currency.

Reporting at Balance Sheet Dates.


Best of Intentions: Companies' Divergent Paths.

Changing Functional Currency.

Knowledge Worth Having.


Part III: Practical Applications (and More Concepts).

Chapter 7: The Intersection.

Interplay of Mathematics, Exchange Rates, Accounting Standards, Economics, and Time.

Time Concepts: PA, PIT, and POT.

The Missing Piece.

Equity and Complex Rates.


Cash Flow Affected by Exchange Rates.

Negative Exchange Rates.

Intercompany Transactions.


Make the Transformation.


Chapter 8: Practical Knowledge.

Things You Should Know.

Exchange Rate Impact: Basic Information.

Analyzing the Exchange Rate Impact.

Constant Currency: A Second Fix.

Improving Constant Currency.

Analysis and Automation.

Multiple Exchange Rate Scenarios.

Constant Year: A Third Fix.

Looking Forward: Beyond the Constants.

Practical Examples or Cautionary Tales.

Financial Reporting and Management Reporting.


Chapter 9: Practical Knowledge.

Things You Can Learn.

A Problem at the Source.

Change It – Use It – Analyze It.

Year-to-Date Translation.

Crossing Zero: A Change in Sign.

The School of Experience.


Chapter 10: Cumulative Translation Adjustment (CTA).

The Algebraic Plug.

Baggage from the Past: Accumulating the Translation Adjustment.

Recalculating CTA.

Translation Adjustment and Intra-Group Monetary Transactions.

Cumulative Translation Adjustment is not Remeasurement.

A Little Fun with CTA.

Problem Solved.


Chapter 11: The Residual.


Devaluations and Revaluations.

Hyperinflationary Economies.

Euro Adoption.

Non-monetary Assets (Inventory) Measured in a Foreign Currency.

Disposal of a Foreign Operation.

A Simple Forward Contract: Hedging.

Heuristic Approach.


Conclusion: Re-invent the Triangle.

Innovate and Advocate.

The Benefit.


Appendix A: World Currency Formats and ISO 4217 Information.

Appendix B: Useful Links, and Why They’re Useful.

Appendix C: Exchange Rate Requirements.

Definition of Actual Rates.

Definition of Constant Currency Rates.

Definition of Forecast Rates.

Definition of Views.

Definition of High (USH) and Low (USL) Rates.

Definition of Rates in the Tables.


About the Author.