A Study On Accounting Measurement And Management For Multinational Corporations' Exchange Risks

The changes of international economy and the financial turmoil in recent years have caused multinational corporations to suffer heavy threats in exchange risks; therefore much attention has been paid to the management for exchange risks. Since our country joined the WTO in December 2001, many corporations here have been aggressively promoting their international business and planning their global strategies. The purpose of this study is to let corporations realize the accounting measurement and the management for multinational corporations' exchange risks, so that they can avoid exchange risks and smoothly promote their business, and finally achieve the goal of steady operation and growth.The accounting measurement for exchange risks is to measure the changes in the cash flow of our currency caused by the changes in exchange rates, the changes created by the assets on the accounting statement, the liability value and the surplus report. According to the mode which multinational corporations are exposed to exchange risks, the measurement system may be divided into conversion in exchange risks, transaction risks and economy risks. The measurement of conversion risks is to use accounting principles and accounting report to measure according to the items listed on the foreign currency statement. The measurement of transaction risks, likewise, is to use accounting principles and accounting report to measure foreign currency exchanges in a fixed or a specific scheduled period. The measurement of economy risks is to consider the ability of the overall corporate adjustment and ponder the economic analysis for the entire future economic activity.The management for exchange risks is to prevent the changes in exchange rates from causing unfavorable influence on corporations. Its approach should, according to the way of risks, regulate the goal of management and the strategy of avoidance, then establish an alarm system and strategies of avoidance, and then carry them out. Gener-ally the goal of management is chiefly meant to avoid risks by way of realistic cost, while the strategy of avoidance mostly adopts optional avoidance. To establish alarm system means to monitor exchange risks in order to determine if there should be an index to be administered. This index can be divided into changes in exchange rates, risk exposure and principles for decision making. The index of changes in exchange rates depends on the range of the changes in exchange risks to determine if it needs to be administered; the index of risk exposure depends on the amount of capital and liability risks that the corporation is involved in at present and in a certain period in the future to determine if it needs to be administered; the index of principles for decision making depends on the comparison of the cost of avoidance strategy and the degree of loss in the risks by way of the principles of cost benefits in order to determine if it needs to be administered and to adopt what division of strategy for risk avoidance.To establish strategies for risk avoidance and to carry it out is the core of management for exchange risks. The parties concerned should choose appropriate strategies for risk avoidance in accordance with its subjective and objective conditions, follow principles for decision making to determine strategies for risk avoidance, and carry them out. During the period of execution, all units in the corporation should cooperate with one another so that smooth operation and the expected goal of management can be achieved.