PERSPECTIVE AND ISSUES
ASC 830 contains five subtopics:
- ASC 830-10, Overall
- ASC 830-20, Foreign Currency Transactions
- ASC 830-30, Translation of Financial Statements
- ASC 830-250, Statement of Cash Flows
- ASC 830-740, Income Taxes
ASC 830 provides guidance about:
- Foreign transaction, and
- Translation of financial statements
Scope and Scope Exceptions
ASC 830 applies to all entities. ASC 830-20 does not apply to derivative instruments. Preparers should look to ASC 815 for guidance on derivatives.
To facilitate the proper analysis of foreign operations by financial statement users, transactions and financial statements denominated in foreign currencies must be expressed in a common currency (i.e., U.S. dollars). Preparing financial statements in a single currency requires the entity to recognize and measure changes in the relationship between different units of currency. The GAAP governing the translation of foreign currency financial statements and the accounting for foreign currency transactions are found in ASC 830.
The guidance in ASC 830 was issued in 1981 and has not changed significantly since that time. The guidance makes four assumptions. It assumes the reporting entity:
- Is located in the United States,
- Uses the U.S. dollar as its reporting currency,
- Is an operating company with a functional currency in U.S. dollars, and
- Provides support to its foreign operations.
However, in today’s global economy, some U.S. ...