2.1 Overview
ASC 830-10
45-2 The assets, liabilities, and operations of a foreign entity shall be measured using the functional currency of that entity. An entity’s functional currency is the currency of the primary economic environment in which the entity operates; normally, that is the currency of the environment in which an entity primarily generates and expends cash.
To comply with the measurement and translation requirements in ASC 830, a reporting entity must identify the appropriate functional currency to use in measuring the financial position and operations of each of its foreign entities. A reporting entity may need to use significant judgment both in identifying foreign entities and in determining the “currency of the primary economic environment,” or functional currency, for each of these entities.