1. Current Method: All current assets and Current liabilities are translated at the current exchange rate.
2. Monetary/ Non-Monetary Method: All monetary assets and current liabilities are translated at the current exchange rate.

Example Current Method:
Unexposed = Net worth + (long term liabilities – long term assets)
? = Net working capital.

Example Monetary/ Non-Monetary Method:
Exposure = Net foreign currency monetary position
? = Financial assets – debt

Managers have two methods for dealing with translation exposure.
1. Balance Sheet Hedge: This eliminates any mismatch between net assets and net liabilities, which are denominated in the same currency. However, this can create transaction exposure.
2. Derivatives Hedge: Use of forward contracts with a maturity of the reporting period in an attempt to manage all accounting numbers. This involves speculation about foreign exchange rate changes. 1. Current Method: All current assets and Current liabilities are translated at the current exchange rate.
2. Monetary/ Non-Monetary Method: All monetary assets and current liabilities are translated at the current exchange rate.

Example Current Method:
Unexposed = Net worth + (long term liabilities – long term assets)
? = Net working capital.

Example Monetary/ Non-Monetary Method:
Exposure = Net foreign currency monetary position
? = Financial assets – debt
1. Current Method: All current assets and Current liabilities are translated at the current exchange rate.
2. Monetary/ Non-Monetary Method: All monetary assets and current liabilities are translated at the current exchange rate.

Example Current Method:
Unexposed = Net worth + (long term liabilities – long term assets)
? = Net working capital.

Example Monetary/ Non-Monetary Method:
Exposure = Net foreign currency monetary position
? = Financial assets – debt

Managers have two methods for dealing with translation exposure.
1….