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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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.

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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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