How to Handle Currency Revaluation for Multi-Currency Accounts (ASC 830)

Thinking Ledger
Jul 11
3 min read

If your startup or small business deals with multi-currency transactions, you're already familiar with the complexities of currency fluctuations. But how do you ensure your books are accurate and GAAP-compliant when your functional currency differs from your reporting currency?

Enter ASC 830, the authoritative guidance on Foreign Currency Matters. In this article, we’ll break down how to handle currency revaluation and translation, when it applies, and how to correctly report foreign exchange gains or losses.

1. Understanding ASC 830: Key Concepts

ASC 830 provides the guidance on:

Determining the functional currency of a business unit
How to remeasure and translate financial statements into the reporting currency
How and when to record exchange rate gains and losses

2. Functional Currency vs Reporting Currency

Term	Definition
Functional Currency	The primary currency of the economic environment in which the entity operates
Reporting Currency	The currency in which the consolidated financial statements are presented

A U.S.-based parent company may report in USD, while its Indian subsidiary may have a functional currency of INR.

3. Translation vs Revaluation

Scenario	Use	Accounting Treatment
Foreign subsidiary’s books are in a different currency	Translation	Required for consolidation
Company holds foreign currency balances (e.g. EUR bank account)	Revaluation	Required each reporting period

4. Handling Foreign Currency Transactions

Any foreign currency transactions (sales, purchases, payables, receivables) must be recorded in your functional currency using the spot rate on the transaction date.

For example, if you invoice a client in Euros while your books are in USD, you:

Convert the invoice to USD using the exchange rate on the invoice date
Revalue it until it is settled

5. Revaluation of Monetary Items

Monetary items are assets or liabilities that are fixed in currency units (e.g., cash, AR, AP, loans).

Revaluation Required

These must be revalued at period-end using the current exchange rate.

🧮 Example

You have €10,000 in your bank account
Functional currency is USD
At month-end, rate changes from 1.10 to 1.08

Revaluation entry: Dr. Foreign Exchange Loss $200

Cr. Cash $200

This loss hits your income statement under foreign exchange gains/losses.

6. Translation of Foreign Entities

When consolidating financials of a foreign subsidiary, ASC 830 requires translating its books into the reporting currency.

Translation Rules:

Financial Statement Item	Translation Rate
Income Statement items	Average rate for the period
Assets & Liabilities	Rate at balance sheet date
Equity accounts (historical)	Use historical exchange rate
CTA (Cumulative Translation Adjustment)	Goes into OCI, not income statement

🧠 CTA appears in the equity section as a plug to make the balance sheet balance after translation.

7. Journal Entry Examples

🔄 Revaluing a Payable:

You owe ₹500,000 to an Indian supplier Initial rate = 74,

Current rate = 76

Functional currency = USD

Dr. Foreign Exchange Loss $135 Cr. Accounts Payable $135

🔄 Translating a Subsidiary Balance Sheet:

● Assets: ₹1,000,000

● Liabilities: ₹400,000

● Use closing rate of 75

● CTA difference plugs into equity

8. Where to Report FX Gains and Losses?

Type	Reported in
Revaluation (monetary items)	Income Statement (Other Income/Expense)
Translation (foreign subsidiaries)	Balance Sheet → Equity → OCI

9. Practical Tips for Bookkeeping Tools

Most tools like QuickBooks Online, Xero, Zoho Books support multi-currency accounts but:

Only revalue balances if you set exchange rates manually at period end
Enable revaluation reports to automate monthly journal entries
Watch out for unrealized vs realized gains — especially on receivables and payables

10. Final Checklist

✅ Determine the functional currency for each entity

✅ Record foreign transactions using spot rates

✅ Revalue monetary assets and liabilities at month-end

✅ Translate foreign subsidiaries using average/closing rates

✅ Post exchange differences to the correct line (P&L vs OCI)

✅ Use reliable FX rate sources and keep records

“We forgot to revalue our EUR balance for three quarters. Our auditor flagged it, and the adjustment hit our bottom line hard.” — SaaS Startup Controller