3.1 Overview

Foreign currency transactions must be remeasured into an entity’s functional currency in accordance with ASC 830-20 on accounting for foreign currency transactions, as described in Chapter 4.

After the remeasurement process, an entity must use the current-rate method to translate its financial statements into its parent’s reporting currency. See Chapter 5 for further discussion related to the translation of foreign entity financial statements.

While ASC 830 provides some guidance on which exchange rates are to be used, it may not always be clear that a particular exchange rate is appropriate and an entity may need to use judgment in making this determination. For example, an entity may often consider economic, market, and political circumstances. This chapter discusses the selection and use of appropriate exchange rates, both as discussed in ASC 830 and in various other situations.