Foreign Currency Translation and Hedging Accounting Key Terms

Know these foreign currency translation and hedging accounting key terms for better business practices

By Angela King, Freelance Writer

As global business networks grow, protection for investments in foreign markets is vital. Currency fluctuation, currency devaluation and currency revaluation are all factors that affect investments, both domestic and foreign. A well-rounded understanding of foreign currency translation and hedging accounting tactics, coupled with diversification within a portfolio, is key to investment growth and protection.

Foreign currency translation and hedge accounting provide safeguards for investments in business ventures in other countries. As you research foreign currency translation and hedge accounting trends and practices, you'll benefit by understanding some key terms.

Financial Standards Accounting Board (FSAB)

The Financial Standards Accounting Board is an independent, private-sector organization that disseminates information related to financial standards which directly affect foreign exchange currency translation and hedge accounting practices.
Try: Visit the FSAB official website for more information on the mission, goals and achievements of the Financial Standards Accounting Board.

Currency fluctuation

Currency fluctuation is a comparison of the value of currencies of different countries. Currency fluctuation is affected by investments within a country and the general economic outlook of a country.
Try: Read more about currency fluctuation at Special-Loans.com.

Diversification

Diversification refers to a stock portfolio that consists of various types of high-risk and low-risk stocks. A well-rounded portfolio that consists of different stocks offers lower risk and usually a higher yield. Foreign investments offer a low-risk alternative to solely domestic investments because the market in one country may not be directly affected by a downturn in the economy of another country.
Try: Investopedia offers extensive information on the advantages of diversification and foreign investments within a portfolio.

Currency devaluation

Currency devaluation is when the currency of one country declines in relation to the currency of another country. Inflation and deficits are two main contributors to currency devaluation.
Try: Read more about currency devaluation at Cliffdroke.com.

Currency revaluation

Currency revaluation occurs when the government of a country with a fixed currency exchange rate changes the value of the currency to offset changes in the economy.
Try: The Federal Reserve Bank of New York offers more information on currency revaluation.

Foreign exchange hedge accounting software

Foreign exchange hedge accounting software is a tool used to compare currency exchange rate changes.
Try: For more information about foreign exchange hedge accounting software and to view examples of software, visit MSN Money.