Translation exposure which is also known as accounting exposure arises for the purposes of reporting and consolidating financial statements from local currencies to home currency when involved with foreign operations. The Financial Accounting Standards Board (FASB) is an accounting association that has rules set out to govern translation exposure. Statement of Financial Accounting Standards No. 52 (FASB 52) is the current translation standard.  FASB No. 52 was adopted in 1981 stating that all firms must use the current rate method to translate foreign currency- denominated assets and liabilities. The current rate method is using the current exchange rate for all conversions in the statements. FASB No. 52 was created because of the dissatisfaction of FASB No. 8. FASB No. 8 true profitability often was disguise by the exchange rate volatility. Under the FASB No. 8, uniform rules were established; the translation gains and losses were reported on the income statement. However, the net income on the statement was affected by the exchange rate which causes uncertainty and volatility.  FASB No. 52 is recorded in a separate equity account on the balance sheet, known as the cumulative translation adjustment account. This bypasses the income statement where it created uncertainty with the exchange rate. Under FASB No. 52 there is a differentiation between the functional and reporting currency. Functional Currency is for the foreign subsidiary. The Functional Currency is the primary economic environment which the currency is used to operate. Reporting currency is the currency that the parent firm uses to prepare its financial statements.   When Functional Currency and Reporting currency are the same the foreign subsidiaries operations are direct extension of the parent firm. Hyperinflation could also cause functional currency and reporting currency to be the same. Hyperinflation is the cumulative inflation rate of 100% over a period time of three years and more.  Source: Shapiro, Alan C., and Atulya Sarin. Foundations of Multinational Financial Management. Custom Edition for California State University, Fullerton. New Jersey: John Wiley & Sons, Inc., 2009.