Translation exposure, also know as accounting exposure, is the impact of currency exchange rate changes on the reported consolidated results and balance sheet of a company. Translation exposure is basically concerned with the present measurement of past events. If an organization has assets valued in a foreign currency, it faces the possibility that the foreign currency will fall in value. If this occurs, the decrease in value “translates” into reduced value of business assets. It is a problem many companies face. It usually occurs when they deal with foreign currencies. This can hurt the value of the companies’ assets, and can appear negatively on their balance sheets. If a company deals with different currencies, they are at risk because currencies are constantly changing in value when compared to one another. This can either help or hurt companies’ actual earnings totals. The possible extent of these gains and losses is measured by the translation exposure figures. An accounting association such as the Financial Accounting Standards Board (FASB) in the Untied States, the parent firm’s government, or the firm itself devises the rules that govern translation. To help manage translation exposure, firms have three methods to do so: 1) adjusting fund flows (altering either the amounts or the currencies of the planned cash flows of the parent or its subsidiaries to reduce the firm’s local currency accounting exposure), 2) entering into forward contracts (reducing a firm’s translation exposure by creating an offsetting assets or liabilities in the foreign currency), and 3) exposure netting (offsetting exposures in one currency with exposure in the same or another currency). The basic hedging strategy for reducing translation exposure uses these methods. Basically, the strategy helps increase hard currency assets and helps decrease soft currency assets, while at the same time decreases hard currency liabilities and increases soft currency liabilities. In conclusion we ought to remember that translation exposure doesn’t describe what is happening to cash flows, just how the firm is perceived.   REFERENCE 1. Shapiro, Alan C. and Sarin, Atulya. Foundations of Multinational Financial Management. New Jersey: John Wiley & Sons, Inc. 2009. 2. Chapter 9 Power Point Slides 3. www.investopedia.com/terms/t/translationexposure