Title:
FOREIGN CURRENCY TRANSLATION METHODS AND THEIR EFFECTS ON FINANCIAL STATEMENTS OF NIGERIAN LISTED MULTINATIONAL CORPORATIONS

Authors:
Omotoso Adedunke Adedolapo, Ifelola Olugbenga Oluwatayo, Awotomilusi Niyi Solomon and Oke Akudo Clara, Nigeria

Abstract:
The precision of translating financial statements that are denominated in foreign currencies into the reporting currency, typically the Nigerian Naira, becomes increasingly crucial as Nigeria's economy grows and more multinational corporations become listed. This study, through a comparative analysis, aims to examine the foreign currency translation methods employed by NLMCs and evaluate their impact on financial statements. This study utilized an ex post facto research design, gathering data from the annual reports and financial statements of Nigerian multinational companies. It focused on ten multinational companies listed on the Nigerian Exchange Group (NGX) as of December 31, 2022, employing a census sampling approach due to the small size of the population. The data covered an eleven-year period from 2012 to 2022. Both descriptive and inferential statistics were used for the analysis. The regression analysis indicated that both the current rate method and the temporal rate method had a statistically significant positive effect on the financial statements of listed multinational corporations in Nigeria. Conversely, the functional currency method exhibited a statistically insignificant negative influence on their financial statements. This suggests that although the current rate and temporal rate methods are associated with improved financial performance, the functional currency method does not significantly impact the financial results of listed multinational companies in Nigeria. These results underscore the substantial influence of the chosen foreign currency translation method on the financial performance of these companies. As a recommendation, this study suggests that multinational corporations in Nigeria contemplate adopting either the current rate method or the temporal rate method for currency translation to enhance their financial performance.