【正文】 nd losses every time exchange rates change. Reflecting such exchange adjustments in current ine could significantly distort reported measures of performance. Many of these gains and losses may never be fully realized, as changes in exchange rates often reverse direction. Multiple rate methods Multiple rate methods bine the current and historical exchange rates in the translation process. Currentnoncurrent method Under the currentnoncurrent method, a foreign subsidiary’s current assets and current liabilities are translated into their parent pany’s reporting currency at the current rate. Noncurrent assets and liabilities are translated at historical rates. Ine statement items (except for depreciation and amortization changes) are translated at average rates applicable to each month of operation or on the basis of weighted averages covering the whole period being reported. Depreciation and amortization changes are translated at the historical rates in effect when the related assets were acquired. Unfortunately, this method makes little economic sense. Using the yearend rate to translate current assets implies that foreign currency cash, receivables, and inventories are equally exposed to exchange risk. This is simply not true. For example, if the local price of inventory can be increased after a devaluation, its value is protected from currency exchange risk. On the other hand, translation of longterm debt at the historical rate shifts the impact of fluctuating currencies to the year of settlement. Many consider this to be at odds with reality. Moreover, current and noncurrent definitions are merely a classification scheme, not a conceptual justification of which rates to use in translation. Moarynonmoary method The moarynonmoary method also uses a balance sheet classification scheme to determine appropriate translation rates. Moary assets and liabilities are translated at the current rate. Nonmoary items—fixed assets, longterm investments, and inventoriesare translated at historical rates. Ine statement items are translated under procedures similar to those described for the currentnoncurrent framework. Unlike the currentnoncurrent method, this method views moary assets and liabilities as exposed to exchange rate risk. Since moary items are settled in cash, use of the current rate to translate these items produces domestic currency equivalents that reflect their realizable or settlement values. It also reflects changes in the domestic currency equivalent of longterm debt in the period in which they occur, producing a more timely indicator of exchange rate effects. Note, however, that the moarynonmoary method relies on a classification scheme to determine appropriate translation rates. This may lead to inappropriate results. For example, this method translates all nonmoary assets at historical rates, which is not reasonable for assets stated at current market values (such as investment securities and inventory and fixed assets written down to market). Multiplying the current market value of a nonmoary asset by a historical exchange rate yields an amount in the domestic currency that is neither the item’s current equivalent nor its historical cost. This method also distorts profit margins by matching sales at current prices and translation rates against cost of sales measured at historical costs and translation rates. Temporal method With the temporal method, currency translation is a measurement conversion process or a restatement of a given value. It does not change the attribute of an item being measured。 it only changes the unit of measure. Translation of foreign balances restates the currency denomination of these items, but not their actual valuation. Under . GAAP, cash is measured in terms of the amount owned at the balance sheet date. Receivables and payables are stated at amounts expected to be received or paid when due. Other assets and liabilities are measured at money prices that prevailed when the items were acquired or incurred (historical prices). Some, however, are measured at prices prevailing as of the financial statement date (current prices), such as inventories under the lower of cost or market rule. In short, a time dimension is associated with these money values. In the temporal method, moary items such as cash, receivables, and payables are translated at the current rate. Nonmoary items are translated at rates that preserve their original measurement bases. Specifically, assets carried on the foreign currency statements at historical cost are translated at the historical rate. Why? Because historical cost in foreign currency translated by a historical exchange rate yields historical cost in domestic currency. Similarly, nonmoary items carried abroad at current values are translated at the current rate because current value in foreign currency translated by a current exchange rate produces current value in domestic currency. Revenue and expense items