5.1 Overview
ASC 830-10
10-1 Financial statements are
intended to present information in financial terms about the
performance, financial position, and cash flows of a
reporting entity. For this purpose, the financial statements
of separate entities within a reporting entity, which may
exist and operate in different economic and currency
environments, are consolidated and presented as though they
were the financial statements of a single reporting entity.
Because it is not possible to combine, add, or subtract
measurements expressed in different currencies, it is
necessary to translate into a single reporting currency
those assets, liabilities, revenues, expenses, gains, and
losses that are measured or denominated in a foreign
currency. Paragraph 830-10-55-1 discusses the meaning of
measurement in a foreign currency.
This chapter focuses on ASC 830-30, which “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.” An entity applies the translation guidance in ASC 830-30 to translate the functional-currency-denominated financial results of foreign entities into a common reporting currency when combining the results of domestic and foreign entities.
The concept of measuring foreign currency
transactions under ASC 830-20 is distinct from the concept of translating financial
statements under ASC 830-30. This distinction is important since the applicability
of the two concepts differs, as does the treatment of the resulting gains and
losses. The following diagram summarizes the difference between the two
concepts: