Translation Adjustments
Accumulated Other Comprehensive Income
Translation under the current rate method often produces differences because different exchange rates are applied to various financial statement elements. These differences are reported in Other Comprehensive Income (OCI) and accumulated in equity.
- Translation adjustment bypasses net income.
- Reported in OCI.
- Accumulated in Accumulated Other Comprehensive Income (AOCI).
Note
Translation adjustments generally do not affect current earnings unless the foreign operation is disposed of.
Summary
Translation adjustments are equity items rather than income statement items.