Chapter 22. FOREIGN CURRENCY (ASC 830)


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). The generally accepted accounting principles (GAAP) governing the translation of foreign currency financial statements and the accounting for foreign currency transactions are found primarily in ASC 830. Additional guidance in this area is provided by ASC 830-30-40.

These principles apply to the translation of

  1. Foreign currency transactions (e.g., exports, imports, and loans) that are denominated in other than a company's functional currency.

  2. Foreign currency financial statements of branches, divisions, subsidiaries, and other investees that are incorporated into the financial statements of a company reporting under U.S. GAAP by combination, consolidation, or application of the equity method.

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