- US GAAP
ASC 830 comprises five Subtopics, below is an overview of each Subtopic.
ASC 830-10 provides general guidance on foreign currency issues, including guidance on determining “how a reporting entity determines the functional currency of a foreign entity (including of a foreign entity in a highly inflationary economy), remeasures the books of record (if necessary), and characterizes transaction gains and losses.”
830-20 Foreign Currency Transactions
ASC 830-20 notes the following:
This Subtopic establishes standards of financial accounting and reporting for foreign currency transactions in financial statements of a reporting entity.
Foreign currency transactions may produce receivables or payables that are fixed in terms of the amount of foreign currency that will be received or paid. Examples include a sale denominated in Swiss francs, a Swiss franc loan, and the holding of Swiss francs by an entity whose functional currency is the dollar. Likewise, a Swiss franc denominated transaction by a German entity or other entity whose functional currency is not the Swiss franc is a foreign currency transaction. For any entity whose functional currency is not the dollar, a dollar-denominated transaction is also a foreign currency transaction.
830-30 Translation of Financial Statements
ASC 830-30 notes the following:
This Subtopic provides guidance for translating foreign currency statements that are incorporated in the financial statements of a reporting entity by consolidation, combination, or the equity method of accounting.
830-230 Statement of Cash Flows
ASC 830-230 discusses guidance on including foreign currency matters in an entity’s state of cash flows.
830-740 Income Taxes
ASC 830-740 notes the following:
This Subtopic addresses the accounting for specific types of basis differences for entities operating in foreign countries. The accounting addressed in this Subtopic is limited to the deferred tax accounting for changes in tax or financial reporting bases due to their restatement under the requirements of tax laws or generally accepted accounting principles (GAAP) in the United States. These changes arise from tax or financial reporting basis changes caused by any of the following:
- Changes in an entity’s functional currency
- Price-level related changes
- A foreign entity’s functional currency being different from its local currency.
This Subtopic addresses whether these changes, which can affect the amount of basis differences, result in recognition of changes to deferred tax assets or liabilities.