Choice of translation methods in financial disclosure: a test of compliance with environmental hypotheses

Despite successive professional pronouncements providing managers with scope to choose between two translation methods, the proportion of firms in Australia using the current method as compared to the temporal method has remained relatively constant over time. Here, use is made of environmental contingency variables to evaluate and explain the consistency of management's adoption of translation methods for foreign financial statements. Tests of the affects of significant operating environmental conditions as on-going constraints on management's decisions and actions do not support hypotheses that choice is usually opportunistic, conservative, deceptive or unnecessarily short-run, given management's risk planning process as a whole. On the basis of the statistical evidence presented, the adoption of particular translation methods can apparently reflect a parent company's broad on-going investment and operating strategies for the organisation as a whole.