The value relevance of the foreign currency translation differences : a study of multinational oil and gas companies in Australia

Article OPEN
Svetalna Vlady (2008)
  • Journal: Revista Tinerior Economisti(The Young Economists Journal), volume 1, issue 10 April, pages 52-63
  • Subject: International Accounting Standards, Current and Temporal Methods, Foreign Translation Differences, Functional Currency, Value Relevance
    • jel: jel:F3 | jel:F00

This paper investigates the relationship between foreign currency translation differences and changes in firm’s market equity value of the Australian multinational firms in the oil and gas industry. The paper empirically examines this relationship under the former Australian accounting standard AASB 1012 “Foreign Currency Translation”. The paper thereby supports the new accounting standard AASB 121 “The Effects of Changes in Foreign Exchange Rates” that adopted a functional currency approach. Since, AASB121 is equivalent to International Financial Reporting Standard IFRS 21 this paper could be useful to understand the effects of foreign currency translation process not only on Australian firms but worldwide
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