Harris International has operations in three countries. When the accountants value the inventory for financial statement purposes, they often find that the value of the fixed assets in dollars has changed even though the actual assets have not changed since the prior accounting period. This is an example of ______ exposure to exchange rate risk.

Question

Quizplus · Accepted Answer

This scenario describes translation exposure, which occurs when a company must convert financial statements from foreign operations into the parent company's currency. Changes in exchange rates can affect the reported value of assets, liabilities, revenues, and expenses even if their actual value in the local currency remains the same.

Harris International Has Operations in Three Countries