A critical step in the application of ASC 830 is the identification of a reporting entity’s foreign entities, which by definition must be a distinct and separable operation.
Whether an operation is a distinct and separable foreign entity will depend on the manner in which the operations are structured. If an operation does not qualify as distinct and separable, it should be considered an extension of another distinct and separable operation (typically, its most immediate parent). A reporting entity should periodically revisit its assessment to determine whether facts and circumstances have changed in such a way as to impact what are considered distinct and separable operations.
This chapter discusses how to identify distinct and separable operations and how to determine if each is a foreign entity or a domestic entity of a reporting entity.
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