Multinational companies typically have subsidiaries in each of the countries where they operate. At the end of the year, every foreign entity then presents its financial statements to the parent company.
These annual financial statements are an important part of many major transactions. They may be needed to reassure potential investors about the company’s financial stability, and they are also essential in securing future partners. As such, in today’s era of globalisation, it is more important than ever for companies to translate their financial statements and localise currencies for investors.
What is a financial statement?
Financial statements provide a review of an organisation’s finances, detailing its performance and profitability for the previous year. It includes a profit and loss account, financial balance sheet, cash flow statement and other information relevant to the company’s finances.
In order to create a complete financial statement, companies must convert all of their foreign currency transactions into one single reporting currency. This translation process allows them to account for all transactions in multiple currencies worldwide.
Financial statement translation
Financial statement translation is the process of converting an organisation’s foreign-denominated balances into the company’s reporting currency. This includes assets, liabilities, fixed assets, revenues, expenses, gains and losses, and all other items denominated in a foreign currency. However, this can get complicated as the value of assets and liabilities are subject to foreign exchange fluctuations.
International accounting standards are essential in order to standardise accounts in numerical terms across borders. This allows companies based in different countries to be compared on a like-for-like basis, ensuring that the numbers are accurate across the board.
Translating more than words
Translation is about converting a message into equivalent terms that the target audience can understand, and as such, it involves more than just words. Translators must also handle numbers, figures and specific terminology unique to the world of accounting and finances. This specialist knowledge is essential for ensuring the documents conform to the standards and norms of the target country.
Financial statements are an invaluable part of running and growing a business. However, they are complex and difficult to translate. Therefore, choosing a professional translation agency that works with specialist financial translators will give you a greater chance of receiving an accurate financial statement translation. This ensures that the person translating your text understands the terminology and has the experience needed to handle these types of documents correctly.
The current rate method
When dealing with consolidated financial statements, one of the most popular methods of translation is the current rate method. As its name suggests, this involves translating values at the current exchange rate rather than using historical rates.
However, exchange rates are volatile and constantly fluctuate from one day to the next. Any gains or losses resulting from the transaction are reported on a separate reserve account using historic rates, which is known as the temporal method.
By excluding any losses and gains resulting from currency translation, this gives stakeholders a clearer picture of the company’s performance.
A few things to consider when translating financial statements
Translating accounting documents requires a deep understanding of international accounting standards, given that the rules for international financial reporting vary by country. Financial statements need to be translated for a global audience. As such, the translator must have a deep understanding of IFRS (International Financial Reporting Standards). This is the set of accounting standards used by accountants to communicate financial information internationally.
When selecting a translation agency, accuracy and professionalism are key. Translators need to have a strong knowledge of finance. You should find an agency with a reputation for accuracy and professionalism so you know they will be able to deliver high-quality translations.
Finally, you will also need to partner with someone you can trust. Confidentiality is critical when translating sensitive financial documents, so make sure you choose a reliable and reputable translation agency. This will give you peace of mind that your translations are being carried out with complete confidentiality and that your information is in safe hands.
An ISO certified translation agency you can trust
At Intertranslations, we are proud to have built a reliable and professional translation agency known for producing quality translations. ISO certified for quality assurance and security, our internal processes ensure your documents are translated to the highest possible standards.
Guaranteed total discretion, we will keep your documents safe and secure from potential leaks. Meanwhile, our specialist financial translators will ensure your documents conform to your target country’s rules and regulations. Want to learn more? Get in touch with our project managers to see how we can help.
