Bojan Savić, Nataša Obradović, Ivan Milojević

DOI Number
First page
Last page


Circumstances, which include international trade intensification, development of various forms of business cooperation outside national borders - co-production, transfer of technology, joint ventures, strategic alliances, direct foreign investments, and dynamic changes in the business environment, require the management of a company to change its focus, from a local to a global approach. Multinational companies are business leaders in a global framework. The aim of this paper is to highlight the key challenges that multinational companies face when translating foreign currency transactions and the financial statements of foreign business operations for the purpose of compiling consolidated financial statements. In addition, the paper examines whether the chosen functional currency and the exchange rate can be viewed as instruments of their financial reporting policy?


consolidated financial statements, IFRS, exchange rate, accounting exposure.

Full Text:



Bakker, E., Rands, E., Balasubramanian, T.V., Unsworth, C., Chaudhry, A., Van Der Merwe, M., Coetsee, D., Varughese, S., Johnstone, C. & Yeung, P. (2017). Interpretation and Application of IFRS Standards. John Wiley & Sons, Ltd.

Bhalla, V.K. (2014). International Financial Management. New Delhi: Chand & Company PVT, Ltd.

Bogićević, J., Šaponja, LJ. & Pantelić, М. (2016). Foreign exchange transaction exposure of enterprise in Serbia. Economic Annals, 90 (209), 161-177.

Butler, K. (2016). Multinational Finance: Evaluating the Opportunities, Costs and Risk of Multinational Operations. New Jersey, John Wiley & Sons, Inc.

Chang, F.Y., Hsin, C.W. & Shiah-Hou, S.R. (2013). A reexamination of exposure to exchange rate risk: The impact of earning management and currency derivative usage. Journal of Banking and Finance, 37 (8), 3243-3257.

Dmitrović-Šaponja, Lj. & Bogićević, J. (2012). Prevođenje vs. preračunavanje finansijskih izveštaja stranih filijala, [Translation vs. Conversion of the Financial Statements of Foreign Branch]. Anali Ekonomskog fakulteta u Subotici, 48 (27), 277-290.

Domanović, V. & Bogićević, J. (2016). Uloga funkcionalne valute u oceni performansi multinacionalnih preduzeća, [The role of the functional currency in the multinational companies` performance evaluation]. Revizor, 19 (73), 39-51.

Elliott, B. & Elliott, J. (2005). Financial Accounting and Reporting. Harlow: Pearson Education Limited.

Epstein, B. & Jermakowicz, E. (2010). Interpretation and application of International Financial Reporting Standards. New Jersey: John Wiley & Sons, Inc.

Gaffikin, M., Dagwell, R. & Wines, G. (2004). Corporate Accounting in Australia. Sydney: UNSW Press Book.

International Accounting Standard Board. (2012). Technical Summary, IAS 21 - The Effects of Changes in Foreign Exchange Rates, Retrieved from:, Accessed on: 15.08.2018.

Kirk, R. (2009). IFRS: A Quick Reference Guide. Burlington: Elsevier.

Krimpmann, A. (2015). Principles of Group Accounting under IFRS. West Sussex: John Wiley & Sons, Ltd.

Mackenzie, B., Coetsee, D., Njikizana, T., Chamboko, R., Colyvas, B. & Hanekom, B. (2013). Interpretation and Application of International Financial Reporting Standards. New Jersey: John Wiley & Sons, Inc.

Madura, J. (2012). International Financial Management. Mason: South Western Cengage Learning.

Mirza, A. & Holt, G. (2011). Practical Implementation Guide and Workbook for IFRS. 3 Edition, New Jersey: John Wiley & Sons.

Pinto, J. (2002). Foreign currency translation method choice: Insight from game theory. Journal of Applied Business Research, 18 (4), 25-34.

Revsine, L. (1984). The Rationale Underlying the Functional Currency Choice. The Accounting Review, 59 (3), 505-514.

Savić, B. (2011). Specifičnosti konsolidovanog finansijskog izveštaja [The Specifics of Consolidated Financial Statements]. Računovodstvo, 55 (9-10), 35-47.

Singh, J. (2014). On the efficacy of the translation methods and the functional currency approach in reporting price level changes. Economic horizont, 16 (2), 101-116.

Shahrokh, M. & Saudagaran, S. (2009). International Accounting – A User Perspective. Chicago: Wolters Kluwer Business.

Soremsem, S. M., Xu, Z. & Kyle, D. (2012). Currency Translation’s Effects on Reported Earnings and Equity: An Instructional Case. Issues in Accounting Education, 27 (3), 837-854.

Škarić-Jovanović, К. & Radovanović, R. (1998). Koncepcije bilansa [Conceptions of Financial Statements]. Beograd: Faculty of Economics, University of Belgrade.

Wang, P. (2009). The Economics of Foreign Exchange and Global Finance. Hull: Springer.



  • There are currently no refbacks.

ISSN 0354-4699 (Print)

ISSN 2406-050X (Online)