A Roadmap to Foreign Currency Transactions and Translations
A Roadmap to Foreign Currency Transactions and Translations
2019
The FASB Accounting Standards Codification? material is copyrighted by the Financial Accounting Foundation, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116, and is reproduced with permission.
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iii
Acknowledgments
This Roadmap reflects the thoughts and contributions of foreign currency specialists in Deloitte's National Office as well as input from the many auditors and advisers in the Deloitte network who, over the past several years, have helped develop the comprehensive views and interpretations in this publication. Ignacio Perez and Dennis Howell supervised the overall preparation of this Roadmap. They wish to extend their deepest appreciation to Bailey Walsh for her hard work in updating this publication. Special thanks also go to the Production group, including Joseph Renouf, the lead technical editor on the project; Amy Davidson, who copyedited the document; and Teri Asarito and Dave Frangione, who designed the Roadmap's layout and graphics.
iv
Contents
Prefacex
Contactsxi
Chapter 1 -- Introduction1
1.1Scope and Scope Exceptions
1
1.2Objective of ASC 830
3
1.3Functional-Currency Approach
3
1.3.1Decision Points
4
1.3.2Mechanics of ASC 830
5
1.3.2.1Measuring Foreign Currency Transactions
6
1.3.2.2Translating Financial Statements
7
Chapter 2 -- Determining the Functional Currency
8
2.1Chapter Overview
8
2.2Definition of a Foreign Entity
8
2.2.1Identifying Distinct and Separable Operations
9
2.3Definition of Functional Currency and Indicators
11
2.3.1Considerations for Shell and Holding Companies
18
2.3.1.1Subsidiaries Formed as Shell or Holding Companies
18
2.3.1.2Parent Formed as a Shell or Holding Company
19
2.4Change in Functional Currency
20
2.4.1Determining When to Change the Functional Currency
24
2.4.2Accounting for a Change in the Functional Currency
24
2.5Change in Reporting Currency
27
Chapter 3 -- Exchange Rates
28
3.1Chapter Overview
28
3.2Selecting Exchange Rates
28
3.2.1Current Rate Versus Average Rate
28
3.2.2Multiple Exchange Rates
30
3.2.2.1Determining the Appropriate Exchange Rate for Remeasurement When Multiple
Rates Exist
31
3.2.2.2Assets and Liabilities Subject to Multiple Exchange Rates
33
3.2.3Preference or Penalty Rates
35
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