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What does the word translation mean? Why is a translation exposure called an accounting exposure?

What does the word translation mean? Why is a translation exposure called an accounting exposure?

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Translation means change or conversion. In the terms of translation exposure, translation is the change or conversion of a company assets, liabilities, equity in foreign currency and the risk associated with change or conversion or a company assets, liabilities, equity in foreign currency is known as translation exposure. The translation/ change/ conversion or a company assets. liabilities, equity in foreign currency mostly occurs due to the result of accounting process, the translation exposure is also known as accounting exposure. Translation exposure is the difference between exposed assets and total liabilities ( liabilities + equity). As we know, accounting deals with the golden equation of Assets = Liabilities + Equity. Hence, we see that translation and accounting deals with the same golden equation, therefore translation exposure is termed as accounting exposure.

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