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ASC 805, Business Combinations, ASC 810, Consolidation, and ASC 323, Investments-Equity Method and Joint Ventures, provide guidance on how a reporting entity should account for acquisitions and dispositions. This chapter outlines guidance specific to the impact of foreign currency on the accounting for acquisitions and dispositions of foreign operations.
When acquiring or disposing of a foreign operation, a reporting entity will need to consider the following foreign currency questions that impact the accounting for the transaction:
  • Whether there has been a change in the selling or acquiring reporting entity’s foreign entities
  • How to determine the functional currency of a new foreign entity
  • Whether an acquisition or disposition causes a change in the functional currency of an existing foreign entity
  • How to allocate goodwill resulting from an acquisition of a foreign operation to the appropriate reporting units
  • Whether a disposition of a foreign operation has an effect on intercompany transactions
  • Whether the cumulative translation adjustment (CTA) account balance for the acquired or disposed foreign entity should be recognized in net income
  • The accounting for the acquisition or disposition of a business, including a foreign operation, is discussed in PwC’s Business combinations and noncontrolling interests guide (BCG).
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