How important is it for companies to entrust the translation of financial statements for foreign countries to professional and specialized translation and localization agencies?
Periodically, a company must draw up a series of documents, both accounting and otherwise, to be able to indicate its equity and financial situation and the economic result of the year.
When translating the financial statements, the linguistic aspect is certainly a factor that needs to be taken care of down to the smallest detail. We do not limit ourselves only to translating and syntactically and grammatically localizing what is stated in the original document. It is clear that when transposing from language to language, some elements or graphic formats must be localized based on the language and country of destination. For example, the translation of the Italian financial statement into American English must take into account the change in the date format, from DD/MM/YYYY to MM/DD/YYYYY. Just as the destination currency also varies, from euro € to dollar $. Localization in the translation of a financial statement therefore takes into consideration the characteristics of the destination country, on a purely linguistic but also regulatory level.
As a rule, the financial statements drawn up in Italian consist of a balance sheet, income statement and explanatory notes. But if we move overseas, to the United States, among the most imported documents, in addition to the Balance Sheet and the Income Statement, there is a document known in American as Cash Flow. This denotes a difference in the structure and form of budget documents from Italian to American. Furthermore, the same accounting regulations and principles can vary from country to country, and therefore from language to language. You choose, according to the internal rules and regulations of the relevant national law, which and how to give priority to certain documents. This switch clearly depends on the economic-political culture of the country of interest.
Remaining in American territory, the accounting principles must strictly comply with the US GAAP regulations issued by the FASB (Financial Accounting Standards Board). However, the American government, based on a common law system (i.e. on jurisdictional precedents rather than on real laws), grants companies and corporations a pseudo-freedom regarding the preparation, presentation and filing of financial statements.
In Italy, however, it is the IASB (International Accounting Standards Board) that issues the accounting standards, IAS and IFRS, which international companies are required to follow scrupulously. International accounting standards allow for a transparent and harmonious framework. According to these principles, we prefer to focus more on substance than on form.
If we instead wanted to go East and focus on one of the world’s economic powers, here too we would find differences in the accounting management and translation of the financial statements. All foreign-invested companies (FIEs) must annually submit – generally by the end of April – the audit, carried out by an authorized CPA accounting firm and officially registered in China, and the delivery to seven different government departments (Bureau of Foreign Trade and Economic Cooperation – BOFTEC, Finance Office, Duties and Customs Office, State Administration of Taxation – SAT, Local Tax Office, Administration of Industry and Commerce – AIC and State Administration of Foreign ExchangeSAFE).
Among the items to which Chinese law pays particular attention are Corporate Income Tax, transactions between group companies and transfer pricing, withholding obligations, stamp duty, Input VAT , Export VAT, and inventory.
These examples make us understand how much the translation of the Italian budget for abroad can vary depending on the country of destination itself, in form, syntax, and in the drafting or presentation procedure.
We cannot freely decide which voices to include, which to neglect. In order to avoid fiscal or legal repercussions, it is advisable that the translation of the financial statements fully respects and reflects the original contents and the regulations in force in the country of origin and destination.
LingoYou has a team of native speaker translators with many years of experience and specialized in financial and financial statement translations in more than 250 languages. To give their best, we urge our translators to receive regular updates on the world of accounting (IAS) and economic matters in the corporate and financial fields. Mastery of financial matters and technical terminology guarantees a coherent and perfectly compliant translation.
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