Chapter 21, Problem 17QP

Summary Introduction

To find: If there is a change in the exchange rate at the end of the year in the balance sheet.

Introduction:

Translation exposure is a risk that is associated with the changes in exchange rates. Here, when Country U-based companies are operated in foreign countries, their assets, liabilities, equities, or net income values change due to the fluctuations in exchange rates.

In this case, the exchange rate variability is highly important for fixing the value for balance sheet items. The risk related with exchange rate on balance sheet items is called transition exposure.