ASC 830, Foreign Currency Matters, and IAS 21, The Effects of Changes in Foreign Exchange Rates, are similar in their approach to foreign currency translation. Although the criteria to determine an entity's functional currency are different under US GAAP and IFRS, both ASC 830 and IAS 21 generally result in the same determination (i.e., the currency of the entity's primary economic environment).
In addition, although there are differences in accounting for foreign currency translation in hyperinflationary economies under ASC 830 and IAS 29, Financial Reporting in Hyperinflationary Economies, both sets of standards require the identification of hyperinflationary economies and generally consider the same economies to be hyperinflationary.
Both US GAAP and IFRS require foreign currency transactions to be remeasured into an entity's functional currency with amounts resulting from changes in exchange rates reported in income. Except for the translation of financial statements in hyperinflationary economies, the method used to translate financial statements from the functional currency to the reporting currency is the same.
In addition, both US GAAP and IFRS require remeasurement into the functional currency before translation into the reporting currency. Assets and liabilities are translated at the period-end rate and income statement amounts generally are translated at the average rate, with the exchange differences reported in equity. Both sets of standards also require certain foreign exchange effects related to net investments in foreign operations to be accumulated in shareholders' equity (i.e., the cumulative translation adjustment portion of other comprehensive income).
In general, these amounts are reflected in income when there is a sale, complete liquidation or abandonment of the foreign operation.
No further convergence is planned at this time.
In December 2011, the FASB proposed an EITF consensus that would require a parent that sells or transfers a group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a consolidated foreign entity to recognize a portion of the cumulative translation adjustment associated with the disposed group of assets in earnings.
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