The Statement of Financial Accounting Standards 52 (henceforth FASB 52), is a ruling which was approved due to dissatisfaction with a previous ruling (FASB 8) about methods of translation and how they should be reported by companies. In FASB 8, it is declared that translation should occur on the income statement. However this led to an extremely unreliable net income for the parent company. In order to fix this problem, FASB 52 established a set of standards which more accurately represented a firm’s profitability. FASB 52’s major change was to divert translation from the income statement to the balance sheet. This set of standards moved translation into an equity account, known as cumulative translation adjustment in the stockholders equity section of the balance sheet. In doing this, exchange rate volatility could no longer misrepresent a firm’s true profitability by manipulating end net income. With the major problem of FASB 8 addressed, the Financial Accounting Standards Board was able to focus on some other issues of translation. Also under FASB 52, a new distinction was made between “functional currency” and “reporting currency.” Functional currency is deemed for use on a parent’s subsidiaries; it represents the currency which is used in the market for which it primarily operates. Reporting currency however, is the currency chosen by the parent company by which it prepares its financial statements in. At times, Reporting and Functional currency may be the same for a multi-national company. There are two specific times when this occurrence happens: during times of hyperinflation and in situations where a foreign subsidiary is a direct operation of the parent firm. The latter is interpreted as a company who has a subsidiary in a foreign company, but does not sell in that country, instead shipping back to the home country for all of its sales. by: Brandon Cook