International Accounting Standards and Financial Translations
Global organizations make money in many countries. A parent company can be comprised of many subsidiaries, branches and divisions. Each subsidiary has its own set of accounting documents, required to meet local accounting, compliance, regulatory and legal standards.
Translating the financials statements of a global, public entity can be a complex business. A couple of zeros out of place by a poorly trained translator can incorrectly and detrimentally transform a million dollar business into billion dollar business or vice versa. This can have a devistating impact for all constituents, including the accountants, banks, lawyers, investors and company stakeholders.
Accuracy, quality and meeting international accounting standards in all language variants are key challenges when translating financial documents. Securing a trusted and experienced translation partner is an absolute requirement to ensure accurate and quality translation of content.
Parent companies within the European Union are required by law to follow international accounting standards, known as the International Financial Reporting Standards (IFRS). IFRS are developed by an independent, not-for-profit organization called the International Accounting Standards Board (IASB). The IFRS provide a global framework for how public companies prepare and disclose their financial statements and gives general guidance on the preparation of financial statements, rather than setting rules for industry-specific reporting. All countries in the EU have been required since 2005 to use IFRS and IFRS are used in many other countries. IFRS have been brought close to the US Generally Accepted Accounting Principles (US GAAP), as developed by the Financial Accounting Standards Board (FASB) in the US. A joint FASB and IASB convergence project is currently in place to eliminate differences between IFRS and US GAAP.
Having an international accounting standard is especially important for large companies that have subsidiaries or operating companies in different countries. Adopting a single set of world-wide standards simplifies accounting procedures by allowing a company to use one reporting language throughout. A single standard will also provide stakeholders, investors and auditors with a cohesive view of finances. However, these standards must be accurately represented in all target languages.
Any company who publishes financial documents, including annual and interim reports, tax statements, mergers and acquisition documents, across international boundaries will need to translate content into the appropriate target language. There are also some countries that make this requirement part of compliance and regulatory standards for any filing or publication. This involves working with a proven finance language service provider who has experience and expertise at working with financial documents and extensive knowledge of the various international accounting standards, including IFRS and US GAAP.
If a company has to comply with IFRS requirements, then the translation of all accountancy content will require consistent applications of IFRS terminology AND require regular access to translators who have accounting expertise and knowledge of the business. This includes building and maintaining multilingual terminology databases for IFRS terminology. An experienced partner will have a vetted and qualified network within their global supply chain of financial translators.
It is so important to work with a language service provider that is constantly updated with official changes and amendments to international accounting practices and standards. An LSP who specializes in financial translations will have full understanding of existing IFRS and IAS requirements and subsequently adapt translation activities, updating relevant terminology databases to reflect the changes – with minimal impact on a client’s reporting practices and financial documents.
Click here for more information on Welocalize’s financial translation language services.
Further Reading: Five Steps to Localization Success in the Financial Sector