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Chapter 4 — Foreign Currency Transactions

4.10 Property, Plant, and Equipment

4.10 Property, Plant, and Equipment

ASC 830-10-45-18 states that PP&E are nonmonetary assets. Therefore, when an entity maintains its books and records in a foreign currency, PP&E must be remeasured in the functional currency at the historical exchange rate (i.e., the rate that was in effect when the PP&E was purchased). Further, upon a triggering event, entities must perform a two-step test under ASC 360-10 to determine whether PP&E is impaired:
  • Step 1 — Compare the carrying amount of the PP&E with the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group).
  • Step 2 — If the carrying value of the PP&E exceeds the undiscounted cash flows determined in step 1, compare the carrying value of the PP&E with its fair value. If the carrying value exceeds the fair value, an impairment loss is recognized for the difference.