1.1 Overview

Since the issuance of FASB Statement 52 (codified in ASC 830) in 1981, domestic and international economies have become more interdependent. In addition, the structures of many multinational corporations have become more intricate. For example, many corporations are organized as a series of holding companies that have no significant operations and only hold investments in other entities within the group. Furthermore, certain significant global functions (e.g., treasury) that transact in many different currencies are performed entirely outside the United States.

Despite such changes in the ways companies are organized and operated, the guidance codified in ASC 830 has not changed significantly over the years. Under ASC 830, it is assumed that the reporting entity uses the USD as its reporting currency and that its foreign operations are either (1) self-contained and integrated into a particular country or economic environment or (2) extensions of the reporting entity. As a result, companies may encounter challenges in applying such guidance to their operating structures because their foreign operations may not fit cleanly into either of the two types contemplated in ASC 830. For example, the treasury function mentioned above may transact in virtually every currency and operate independently from the reporting entity. That is, it is neither (1) contained in a particular economic environment nor (2) an extension of the reporting entity.