CURRENT RATE METHOD

A method of foreign currency translation where most items in the financial statements are translated at the current exchange rate. The exception would be income statements items, which are translated at actual exchange rates.

This method of is the most widely used currency translation method.

The gains and losses associated with this translation are reported on a reserve account instead of the consolidated net income account. This helps to reduce the volatility of consolidated earnings. It is also more helpful for management, shareholders and creditors in evaluating a company because losses and gains resulting from the exchange rate are excluded for the consolidate earnings.