How to Translate Financial Statements: An Introduction
When it comes to translating financial statements, there are quite a few special considerations to bear in mind.
A great deal of care and precision is required in order to ensure that the translated financial statements or accounts accurately represent the original accounts. International accounting standards attempt to standardize accounts in numerical terms across borders, allowing for companies based in different countries to be compared on a like-for-like basis. But when it comes to the language, accurate translation is absolutely key in order to ensure that the financial statements can be easily and correctly understood in another language.
For example, any mistake in the numbers could have serious consequences. What if accounts payable of $100,000 in one language become $1,000,000 in another? This could lead to withdrawal by a potential investor…serious consequences indeed.
And then there are the precise, technical terms, date conventions and format. All of these should be taken into account if financial statements are to be translated effectively.
I explain more below.
Let’s start with the technical terms. These often have an exact meaning in accounting, and therefore need to be used very carefully. Sometimes relatively simple-sounding terms can have an exact meaning when placed in the accounting context. Translating them “normally” is not going to work; an exact and appropriate contextual translation is required.
For example, amortization and depreciation have special, clear meanings. Both relate to the depreciation in the value of assets over time. Depreciation relates to fixed assets while amortization relates to intangible assets. Current assets and current liabilities have a special meaning too, the “current” component normally indicating a time period of 1 year. So current assets are assets that can be converted into cast within 1 year, and current liabilities are debts that are payable within one year.
Because of the technical language, it is important that financial translations are carried out by specialist financial translators. In the case of financial statements, the translation should be performed by an experienced translator who is also an accounting subject matter specialist—someone who completely understands the nature of financial statements in both the original (source) and translated (target) languages.
Financial statements have a specific format and usually this format should be maintained when translating from one language to another. Data often appears in parallel columns and it is important to maintain the original layout in order to facilitate the comprehension of the accounts in the translated language.
Sometimes this format needs to be re-created. For example, if the original accounts are in a pdf format, and no equivalent WORD document is available, then the financial translator may need to reproduce the format when creating the translated accounts. This means that the translator should also be a competent formatter.
When it comes to financial statements, dates are very important indeed. This is because the accounts represent a snapshot of a company’s situation at a particular point in time. Therefore, the dates should be clearly and appropriately written, making sure not to cause any confusion for a person reading the translated financial statements.
There are also different date format conventions and it is important that the translator understands the required format.
31 March 2017 or March 31, 2017?
The description accompanying the date is also going to have a special meaning.
“As at 31 December 2017” refers to a point in time.
“Year ending 31 December 2017” refers to the activity in the 12 months up to an including 31 December 2017.
While these dates might be clear in the original document, it is important that they are translated correctly in order to preserve the exact meaning.
Number and Currency Conventions
Financial statements are all about numbers! And therefore it is essential that these numbers are correctly represented in translated documents. The same goes for currencies.
And the thing is, numbers and currencies are not represented in exactly the same way in different languages and countries.
For example, one million in English should be written as 1,000,000 whereas in Spanish it is normally going to be written as follows: 1.000.000
It is easy to understand, therefore, that if the numbers are not correctly translated or transferred from one language to another, then this could cause a great deal of confusion!
Monetary amounts in different currencies also need to be written clearly. For example, USD $1,000.
So, as you can see, it is not only about translated the words, when it comes to translating financial statements these other considerations are very, very important. For this reason, the translation of financial statements should be performed by experienced financial translators, with an in-depth knowledge of the subject matter, conventions and formatting requirements.
For all of the points mentioned above, consistency is key.
When it comes to dates, all of the dates should be presented in the same format.
When it comes to currencies / monetary amounts, they should be presented in the same format.
And when it comes to technical terms, it is important that they are used consistently throughout the document.
There are a number of different resources to help financial translators in the translation of financial statements.
Websites such as investopedia.com and accountingcoach.com are great for reviewing technical terms. There are also lots of financial statements available online in most countries and languages, which can help financial translators by providing a guide showing how other companies have produced their accounts in different languages.
How to Translate Financial Statements: Conclusions
Translating financial statements accurately is not easy. But with the right preparation and approach it is possible to achieve excellent results.
Here at 100 Percent Languages, we work with an experienced team of financial translators to ensure that your financial statements are translated to the highest standards.
Want to find out more? Get in touch today and we can discuss your specific requirements.