Conversion risk, also known as accounting risk and conversion risk, refers to the possibility that the amount of some fund items in the balance sheet of an enterprise will change due to changes.
According to the types of financial statements, translation risk is generally divided into income statement risk and balance sheet risk.
Conversion risk is a kind of paper loss and income, not the actual profit or loss when the actual delivery, but will affect the reported results of the assets and liabilities of the enterprise.
In the event of a conversion risk, the amounts of items (assets, liabilities, revenues and expenses) measured in foreign currency must be restated locally and in accordance with the accounting regulations of the parent country.
In order to consolidate assets, liabilities, revenues and expenses originally measured in foreign currency into the local currency account, the company must restate the amounts of such items measured in foreign currency in local currency, also known as translation restatement.
This must be in accordance with regulations set by the government of the parent country or the company itself.
