Foreign currency

Accounting guide

This guide provides a framework and specific examples of how to account for foreign currency transactions and foreign operations.

This guide was issued in December 2014.

Foreign currency accounting continues to be a topic of interest because of increased foreign exchange rate volatility and certain countries with high inflation and multiple exchange rates.

The basic foreign exchange guidance, now codified in ASC 830 Foreign Currency Matters, was first issued back in 1981 as FAS 52. It provides a model for reporting when an entity conducts transactions in more than one currency. The entity prepares financial statements in a single currency, which requires that changes in the relationship between different units of currency be recognized and measured. ASC 830 uses two processes to express all of a reporting entity’s transactions in a single reporting currency: foreign currency measurement and foreign currency translation.

Foreign currency measurement is the process by which an entity expresses transactions whose terms are denominated in a foreign currency in its functional currency. Changes in functional currency amounts that result from the measurement process are called transaction gains or losses; transaction gains and losses are included in net income.

Foreign currency translation is the process of expressing a foreign entity’s functional currency financial statements in the reporting currency. Translation adjustments are included in the cumulative translation adjustment (CTA) account, which is a component of other comprehensive income.

About the Foreign currency guide

The inaugural edition of our accounting and financial reporting guide, Foreign currency, addresses the accounting for foreign currency transactions and foreign operations under U.S. GAAP. The guide discusses the framework for accounting for foreign currency matters, accounting implications, and includes specific examples related to various topics such as:

  • Determining functional currencies
  • Accounting for foreign currency transactions
  • Translating financial statements of foreign entities
  • Highly inflationary economies
  • Intercompany transactions denominated in foreign currencies
  • Acquisitions and dispositions of foreign operations

Downloading the guide onto an iPad

  1. Click on the button below to open document:
    Foreign currency
  2. Once the PDF opens, click on the Action button, which appears as a square icon with an upwards pointing arrow.
  3. From within the action menu, select the "Copy to iBooks" option.
  4. The guide will then be saved to your iBooks app for future access.

Contact us

John Bishop
Partner, National Professional Services Group

Follow us