So I am conducting a research on applying Data Envelopment Analysis (DEA) for comparing efficiencies of different companies working in different countries and thereby publishing their financial statements in different currencies. However, before I plug in the values such as revenues and expenses taken from respective financial statements into the DEA model, I need to make sure I am comparing apples with apples and not oranges. I have one company of US, another of UK and another of Europe therefore I have values of their revenues and expenses in US Dollars, British Pounds and Euros. And these are different companies as opposed to subsidiaries of the same company. I want to know if there is any standard method in research for handling such a case i.e. how to bring all revenues and expenses of all companies on a single currency. An apparent layman approach would be to simply check the exchange rate of respective currency with US Dollar and multiply it to get all values converted to US Dollar equivalents. However, Is it acceptable in research and/or standard accounting practices?
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2$\begingroup$ The layman approach that you suggest is fine. If your objective is to make sure you have an "apples to apples" comparison, the currency that you choose to base your research in pales in comparison to the different accounting standards and practices in different regions. $\endgroup$– amdoptFeb 17 at 12:13
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My opinion is that you should use at least the PPP currency rate and not the direct currency rate. But like @amdopt said, there might be much more prominent differences in accounting standards.
