Abstract
The purpose of this paper is to study the meaning of the translation adjustment as a component of net asset of comprehensive income. We make the theoretical background clear that the translation adjustment is composed of comprehensive income, for it has the nature not only revenue and expense but also receipt and disbursement in the future.
First, we examine it from the view point of recapitalization theory, valuation account theory and deferred account theory without under particular income notion. The result shows that the translation adjustment can be characterized as both valuation account theory and deferred account theory under nominal capital maintenance. Secondly, we need to consider the translation adjustment from the view point of both deferred account theory and valuation account theory on comprehensive income. It is clear that the translation adjustment can be characterized as deferred account theory, for the translation adjustment has independent character as revenue and expense in the future. In addition, we confirm the reason that the translation adjustment is not composed of asset and liability on balance sheet by comparison with other items.
