Saturday, September 12, 2009

Constant Currency Issues

Received this email just recently about constant currency issues. Interesting read. Would appreciate hearing from others on this issue.

When a company reports on a constant currency basis (I am concerned with quarter-to-quarter and year-to-year) what currency do they use to make these calculations. My first inclination would be to assume that they use the exchange rate at the beginning of the term of change in which they are quoting, so for example if they state that revenue grew 10% on a constant-currency basis from Jan 1, 2008 to Jan, 1 2009, then they use the exchange rate from Jan, 1 2008. Is it safe to assume that this will always be the case? I am having trouble finding footnotes in the 10Ks.

The email comes from a

Troy J. Pospisil
Deloitte Consulting LLP | Strategy & Operations
Mobile: 949.500.8013 | Fax: 213.694.5119