Translation differences (écarts de conversion) are the OCI items arising when a group consolidates foreign subsidiaries — translating their local currency financial statements into the group's reporting currency at different exchange rates (assets at closing rate, income statement at average rate). The resulting difference is accumulated in equity as a translation reserve until the foreign subsidiary is sold. In financial due diligence on international groups, significant accumulated translation differences signal either historical FX exposure or structural currency mismatch between functional currencies of operations and reporting currency.

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Example: a Swiss group with a UK subsidiary records CHF -3.2 million of accumulated negative translation differences following sterling depreciation over 3 years. This OCI item reduces reported equity by CHF 3.2 million but has no cash impact. In the acquisition bridge, it reduces the book net assets reference but is excluded from the normalised EBITDA — an important separation between accounting presentation and economic reality.

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Hectelion analyses accumulated translation differences in international group due diligence to distinguish accounting FX presentation from operational FX risk.