Financial Accounting Standards Board Statement No 52

Financial Accounting Standards Board Statement No 52

Summary of Financial Accounting Standards Board Statement No 52

A set of accounting rules governing offshore and multicurrency transactions, adopted in 1981 and mandatory for use by December 15, 1984. FASB 52 replaces Financial Accounting Standards Board Statement No. 8 (read this and related legal terms for further details), with which there had been much dissatisfaction. Significant features of FASB 52 include: (1) gains or losses arising from exchange transactions will be reflected in the firm’s capital account rather than in current income (there had been significant criticism of FASB 8 in that its treatment of gains and losses on exchange in current income was distortive and at variance with economic reality); (2) all vehicles for mitigating the effects of exchange fluctuation, e.g., any contract, transaction, or balance, would be treated as a hedge, irrespective of form; and (3) the functional currency of an entity in a “highly inflationary economy” (i.e., experiencing an inflation rate of 100 percent or more) shall be the U.S. dollar. The board felt that a national currency under such inflationary pressures is unsuitable as a reporting medium.

(Main Author: William J. Miller)


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