ACCOUNTING FOR THE MULTINATIONAL-FIRM - IS THE TRANSLATION PROCESS VALUED BY THE STOCK-MARKET

• 成果类型: Article
• 署名作者: SOO, BS; SOO, LG
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• 发表日期: 1994
• 页码: 617-637
• 关键词: unexpected earnings; MODEL

摘要

This study examines whether the stock market considers foreign exchange transaction and translation gains and losses when pricing equity securities, and whether the value assigned by the market is significantly different from that assigned to other components of accounting earnings. It also examines whether the market's valuation of foreign exchange gains and losses differed in the periods covered by Statement of Financial Accounting Standards (SFAS) 8 and SFAS 52. For a sample of firms affected by both SFAS 8 and SFAS 52, we find evidence that the market incorporates information on foreign exchange gains and losses reported in income when valuing equity securities. The market appears to use this information in a manner similar to the way it uses other earnings information; we find this result for the foreign exchange gains and losses calculated under both standards. We also find that the market incorporated foreign translation gain and loss information reported in stockholders' equity under SFAS 52 when valuing equity securities, but the effect of this information on stock prices was smaller than the effect of other earnings. The results are consistent with the market using earnings-related information reported directly in stockholders' equity and not on the income statement. Overall, the results support the contention that foreign currency translation adjustments should be separated from other earnings components in the financial statements.