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U.S. GAAP: Accounting for Foreign Currency |
IFRS: Accounting for Foreign Currency |
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Selection of functional currency is open to judgment, but in practice there is a greater emphasis on cash flows than on currency that influences pricing of output |
Greater emphasis placed on the currency of the economy that influences sales prices for goods and services
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Choice of reporting (presentation) currencies, and if other than functional currency translate assets and liabilities at balance sheet date exchange rate, income and expense at rate at dates of transactions (or average for period, if not materially different)
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Very similar to US GAAP |
| Exchange losses to be expensed in all instances |
Exchange losses on a liability for the recent acquisition of an asset invoiced in a foreign currency either as
1. Charge to expense, or
2. Add to the cost of the asset when the related liability cannot be settled and there is no practical means to hedge
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Current exchange rate use to translate all balance sheet items, including goodwill and fair value adjustments
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Same as under U.S. GAAP |
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In highly inflationary economy (having cumulative three year price change of 100%), parent’s currency (U.S. dollar) must be used as functional currency
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In hyperinflationary economy, an entity cannot avoid restatement under IAS 29 by adopting stable currency (e.g., that of parent company) as functional currency. |
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Equity accounts are translated at historical rates
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Translation of equity accounts not specified under IFRS |
