So far, we have been dealing with foreign currency conversions. Interesting problems arise with foreign currency translations, where no money changes hands but bookkeeping entries and financial statements are restated in a different currency. We touched on this in Chapter 18 (see Comparing competitors). Let me give another example which shows how unavoidable errors and discrepancies can arise.
Sleight of hand
A subsidiary records payments due to its parent company (but does not necessarily make the payments) in March and August. At the rate applicable on the dates of the entries, a total of $100 million was owed to the parent company. See following table.
However, the transactions are probably not booked at the spot exchange ...