The Impact of IFRS for EPM Reporting – Part 7

In Part 7, I want to provide more detail on the similarities and differences regarding Foreign Currency Matters. This week I'll keep it short due to other projects I am working on... but again the details below were from a presentation during a company sponsored educational seminar about IFRS.

Foreign Currency Matters

Similarities

• Similar approaches to foreign currency translation, guidance is different, but generally results in the same determination
• Both consider the same economies to be hyperinflationary
• Both required foreign currency transactions to be remeasured into functional currency with amounts resulting from changes in exchange rates being reported in income
• Both require assets and liabilities to be translated at period-end rate, and income statement amounts generally at average rates, with differences in equity

Differences

Translation in hyperinflationary economy

• US GAAP – Local functional currency remeasured as if it was the reporting currency (parent)
• IFRS – local functional currency financial statements are indexed using a general price index and then translated to the reporting currency at the current rate

Consolidation of foreign operations

• US GAAP – step by step method is used
• IFRS – method is not specified. Either the direct or the step by step method is used.