Comparison between U.S. GAAP and International ... - Grant Thornton

Comparison between U.S. GAAP and International Financial Reporting Standards 130
IFRS
each individual entity included in the reporting entity to be
translated into the currency in which the reporting entity
presents its financial statements. The presentation
currency of the reporting entity may be any currency or
currencies. The results and financial position of any
individual entity within the reporting entity whose
functional currency differs from the presentation currency
are translated in accordance with IAS 21.38-.50
(IAS 21.18).
Stand-alone entity preparing financial statements or an
entity preparing separate financial statements in
accordance with IAS 27
IAS 21 permits a stand-alone entity preparing financial
statements or an entity preparing separate financial
statements in accordance with IAS 27 to present its
financial statements in any currency or currencies. If the
entity’s presentation currency differs from its functional
currency, its results and financial position are also
translated into the presentation currency in accordance
with IAS 21.38-.50 (IAS 21.19).
Hyperinflationary economy
If the functional currency is the currency of a
hyperinflationary economy, the entity’s financial
statements are restated in accordance with IAS 29
(IAS 21.14) (see Hyperinflationary economies section
below).
U.S. GAAP
Each individual entity included in the reporting entity
The financial statements of separate entities within an
enterprise, which may exist and operate in different
economic and currency environments, are consolidated
and presented as though they were the financial
statements of a single enterprise. Because it is not
possible to combine, add, or subtract measurements
expressed in different currencies, it is necessary to
translate into a single reporting currency those assets,
liabilities, revenues, expenses, gains, and losses that
are measured or denominated in a foreign currency
(ASC 830-10-10-1).
Hyperinflationary economy
If the functional currency is the currency of a
hyperinflationary economy, the entity’s financial
statements are restated in accordance with
ASC 830-10-45-11 and 45-17 (see Hyperinflationary
economies section below).
Reporting foreign currency transactions in the functional currency
Initial recognition
A foreign currency transaction shall be recorded, on initial
recognition in the functional currency, by applying to the
foreign currency amount the spot exchange rate between
the functional currency and the foreign currency at the
date of the transaction (IAS 21.21).
A rate that approximates the actual rate at the date of
transaction is often used (e.g. an average rate for a week
or a month might be used for all transactions in each
foreign currency occurring during that period if rates do
not fluctuate significantly (IAS 21.22).
Reporting at the ends of subsequent reporting periods
At the end of each reporting period (IAS 21.23):
• Foreign currency monetary items shall be translated
using the closing rate
• Non-monetary items that are measured in terms of
historical cost in a foreign currency shall be translated
using the exchange rate at the date of the transaction
Initial recognition
All elements of financial statements shall be translated
by using the current exchange rate. For assets and
liabilities, the exchange rate at the balance sheet date
shall be used. For revenues, expenses, gains, and
losses, the exchange rate at the dates on which those
elements are recognized shall be used. Because
translation at the exchanges rates at dates the
numerous revenues, expenses, gains, and losses are
recognized is generally impractical, an appropriately
weighted average exchange rate for the period may be
used to translate those elements
(ASC 830-30-45-3 through 45-5).
Reporting at the ends of subsequent reporting periods
For other than derivative instruments, the following shall
apply to all foreign currency transactions of an
enterprise and its investees
(ASC 830-20-30-1 and 35-2):
• At the date the transaction is recognized, each
asset, liability, revenue, expense, gain, or loss
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