Paul E. Holt¹, Gonzalo Rivera Jr.²

Abstract: Previous studies empirically tested the use of several foreign currency translation methodologies, including a purchasing power parity (PPP) construct method against the normative criterion of variability of earnings, and found that the use of PPP resulted in lower variability of translated earnings when translation were made between the US dollar and the UK pound. In the current study, the temporal characteristics of fifty sample companies were determined and used to translate accounts between the US dollar and the Japanese yen and between the US dollar and the UK pound, using several translation methodologies, include a PPP construct methodology. Although the US/UK replication produced results similar to previous studies, the US/Japan translations produced a nearly opposite effect, which calls into question the informational value of PPP in the Japanese environment. However PPP should be tested against other normative criteria in the dollar/yen translation.