Foreign Currency Matters, ASC 830

SFAS 52, December 1981
“Foreign Currency Translation”

1. Functional currency
–> the currency of the primary economic environment
–> of the entity

2. Accounting transactions are measured and recorded in functional currency

Reporting currency
–> the currency used to report financial statements

If reporting currency is not functional currency
–> all items reported in financial statements are
–> translated from functional currency to reporting currency

1. If accounting transactions are recorded in local currency that is not functional currency
–> remeasure accounting records from local currency to functional currency
–> then translate from functional currency to reporting currency
2. Accounting records after remeasurement
–> will be same as (1)
(1) accounting records when all transactions were recorded in functional currency

1. For nonmonetary accounts
–> use historical rates between local currency and functional currency
2. For revenue and expenses resulted from nonmonetary accounts
–> use historical rates between local currency and functional currency
3. For monetary accounts
–> use current rate between local currency and functional currency
4. Foreign currency transaction gains and losses are also recognized

–> recognized in income
–> with some exceptions
–> as explained in the Codification Topic 830-20

–> reported in other comprehensive income (OCI)
–> as explained in the Codification Topic 830-30

When functional currency changes
–> previous financial statements are not restated