Fasb 52

Statement of Financial Accounting Standards No. 52
FAS52 Status Page FAS52 Summary

Foreign Currency Translation
December 1981

Financial Accounting Standards Board
of the Financial Accounting Foundation 401 MERRITT 7, P.O. BOX 5116, NORWALK, CONNECTICUT 06856-5116

Copyright © 1981 by Financial Accounting Standards Board. All rights reserved. No part of this publication may bereproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the Financial Accounting Standards Board.

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Statement of Financial Accounting Standards No. 52 Foreign Currency Translation December 1981 CONTENTS Paragraph Numbers Introduction................................................................................................................. 1– 3 Standards of Financial Accounting and Reporting: Objectives of Translation ........................................................................................... 4 The Functional Currency...................................................................................... 5–10 The Functional Currencyin Highly Inflationary Economies ................................... 11 Translation of Foreign Currency Statements...................................................... 12–14 Foreign Currency Transactions .......................................................................... 15–16 Forward Exchange Contracts ............................................................................. 17–19Transaction Gains and Losses to Be Excluded from Determination of Net Income........................................................................... 20–21 Income Tax Consequences of Rate Changes...................................................... 22–24 Elimination of Intercompany Profits ........................................................................ 25 Exchange Rates.................................................................................................. 26–28 Use of Averages or Other Methods of Approximation ............................................ 29 Disclosure........................................................................................................... 30–32 Effective Date andTransition............................................................................. 33–38 Appendix A: Determination of the Functional Currency........................................ 39–46 Appendix B: Remeasurement of the Books of Record into the Functional Currency ..................................................................................... 47–54 Appendix C: Basis for Conclusions ......................................................................55–149 Appendix D: Background Information................................................................ 150–161 Appendix E: Glossary ................................................................................................. 162

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FAS 52: Foreign Currency Translation

FAS 52 Summary
Application of this Statement will affect financial reporting of most companies operating in foreigncountries. The differing operating and economic characteristics of varied types of foreign operations will be distinguished in accounting for them. Adjustments for currency exchange rate changes are excluded from net income for those fluctuations that do not impact cash flows and are included for those that do. The requirements reflect these general conclusions:

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The economic effects of anexchange rate change on an operation that is relatively self-contained and integrated within a foreign country relate to the net investment in that operation. Translation adjustments that arise from consolidating that foreign operation do not impact cash flows and are not included in net income. The economic effects of an exchange rate change on a foreign operation that is an extension of the...