I just want to make sure, if I am doing this right. I am going to use my translation from XF 1.2.1 for XF 1.4. So I will create a new language in XF 1.4 and overwrite it with that exported language from 1.2.1 and it will overwrite the phrases, that are common for both XenForo verions? Am I right? Thanks.
It will translate any phrases with the same name between versions, yes. However, some phrases may have had content tweaks since then, so you'll need to verify that your translation has the necessary content. You can see these listed as "outdated phrases".