Statement of Financial Accounting Standards No. 8

INTRODUCTION
The expansion of international business activities, extensive currency realignments—including two U.S.
dollar devaluations—that followed the recent major revision of the international monetary system, and the
acceptance in practice of significantly different methods of accounting have highlighted problems concerning
foreign currency translation. (Terms defined in the glossary in Appendix E are in boldface type the first time
they appear in this Statement.) Appendix B presents background information for this Statement.
This Statement establishes standards of financial accounting and reporting for foreign currency
transactions in financial statements of a reporting enterprise (hereinafter enterprise). It also establishes
standards of financial accounting and reporting for translating foreign currency financial statements
incorporated in the financial statements of an enterprise by consolidation, combination, or the equity method of
accounting. Translation of financial statements from one currency to another for purposes other than
consolidation, combination, or the equity method is beyond the scope of this Statement. For example, this
Statement does not cover translation of the financial statements of an enterprise from its reporting currency
into another currency for the convenience of readers accustomed to that other currency.
To incorporate foreign currency transactions and foreign currency financial statements in its financial
statements, an enterprise must translate—that is, express in its reporting currency 1 —all assets, liabilities,
revenue, or expenses that are measured in foreign currency or denominated in foreign currency 2 and that arise
in either of two ways:
Foreign currency transactions—an enterprise (a) buys or sells on credit goods or services whose
prices are stated in foreign currency, (b) borrows or lends funds and the amounts payable or
receivable are denominated in foreign currency, (c) is a party to an unperformed forward
exchange contract, or (d) for other reasons, acquires assets or incurs liabilities denominated in
foreign currency.
Foreign operations—an enterprise conducts activities through a foreign operation whose assets,
liabilities, revenue, and expenses are measured in foreign currency.

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