The translation gain (or loss) is simply a paper gain (or loss). Conversely, the gain (or loss) resulting from a hedge strategy is a real gain (or loss).

Question

Quizplus · Accepted Answer

Translation gains or losses arise from the conversion of financial statements of foreign operations into the reporting currency and are not realized through actual cash transactions, making them "paper" gains or losses. Conversely, gains or losses from hedge strategies involve actual financial transactions to mitigate risk, resulting in real gains or losses that affect cash flow.

The Translation Gain (Or Loss) Is Simply a Paper Gain