Abstract
Statements of Financial Accounting Standards (SFAS) are rules and procedures designed to establish reliable financial information. The Financial Accounting Standards Board (FASB) defines reliable financial information in Statement of Financial Accounting Concept No. 2 as information that is reasonably free from error and bias and faithfully represents what it purports to represent [FASB, 1980, paragraphs 59, 77]. Under SFAS No. 52 [FASB, 1981], however, the temporal rate method of translating foreign currency denominated financial statements may not produce reliable information. The result is that consolidated financial statements of U.S. companies may include unreliable components such as under (over) valued assets. The findings of this paper are important because unreliable financial information places U.S. firms at a competitive disadvantage by hindering efficient and effective business decisions.
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Makar, S.D., Stanko, B.B. & Zeller, T.L. Foreign currency translation under the temporal rate method. International Advances in Economic Research 2, 444–456 (1996). https://doi.org/10.1007/BF02295469
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DOI: https://doi.org/10.1007/BF02295469