What to know about the functional currency approach
On the Radar: Foreign currency accounting
When an entity’s financial statements include foreign operations, it must consolidate those foreign entities and present them as if they were one. This edition of On the Radar offers guidance for translating the accounts of foreign entities as advised under ASC 830, otherwise known as the "functional currency approach."
Foreign currency matters
Many entities operate in multiple countries. When an entity’s financial statements include foreign operations, the entity must consolidate those foreign entities and present them as though they were the financial statements of a single reporting entity. This process of translating the accounts of foreign entities is addressed in ASC 830, which has existed for decades without recent substantial changes, and is known as the "functional currency approach."
Under the functional currency approach, a reporting entity must perform four steps:
Andrew Pidgeon
