IAS 21 vs ASC 830: foreign currency

A group with operations abroad translates their results every month, and in most cases IFRS and US GAAP give the same numbers. The exceptions are the countries where inflation is high or the currency cannot be freely exchanged, which are exactly where the numbers are hardest. This guide compares IAS 21 with ASC 830 side by side, works through a subsidiary in a hyperinflationary economy under both, and covers functional currency, the translation reserve, deferred tax and the recent IAS 21 amendments.

By Hamza Fida, Chartered Accountant (ICAP). Reviewed by Mirza Fahad Baig, Chartered Accountant (ICAP). Updated . 7 minute read.

Short answer

IAS 21 vs ASC 830 share one model. Each entity identifies its functional currency, the currency of its primary economic environment; records foreign currency transactions at the spot rate; remeasures monetary items at the closing rate through profit or loss; and translates foreign operations into the presentation or reporting currency at closing rates for assets and liabilities and average rates for income and expenses, with the difference in a cumulative translation adjustment in other comprehensive income. The differences are at the edges. IAS 21 ranks the indicators of functional currency; ASC 830 does not. In a hyperinflationary economy, IFRS restates the operation's figures for inflation under IAS 29 and then translates them at the closing rate, while US GAAP treats an economy with cumulative inflation of about 100% or more over three years as highly inflationary and remeasures the operation as if the parent's reporting currency were its functional currency. The rules for releasing the translation reserve on partial disposals differ, and only IFRS has a model for estimating a rate when a currency is not exchangeable. In this guide's example, the same plot of land is carried at CU 90 million under IFRS and CU 100 million under US GAAP.

At a glance

Core model
Same: functional currency
Translation
Closing and average
Hyperinflation
Restate vs remeasure
Threshold
100% over 3 years
Reserve release
Narrower in US GAAP
No exchangeability
Estimate under IFRS
IAS 21 vs ASC 830: foreign currencyCore model: Same: functional currency; Translation: Closing and average; Hyperinflation: Restate vs remeasure; Threshold: 100% over 3 years; Reserve release: Narrower in US GAAP; No exchangeability: Estimate under IFRS.KEY FACTS AT A GLANCEIAS 21 vs ASC 830: foreign currencyCore modelSame: functional currencyTranslationClosing and averageHyperinflationRestate vs remeasureThreshold100% over 3 yearsReserve releaseNarrower in US GAAPNo exchangeabilityEstimate under IFRSTax BakersIAS 21 vs ASC 830: foreign currencyCore model: Same: functional currency; Translation: Closing and average; Hyperinflation: Restate vs remeasure; Threshold: 100% over 3 years; Reserve release: Narrower in US GAAP; No exchangeability: Estimate under IFRS.KEY FACTS AT A GLANCEIAS 21 vs ASC 830: foreigncurrencyCore modelSame: functional currencyTranslationClosing and averageHyperinflationRestate vs remeasureThreshold100% over 3 yearsReserve releaseNarrower in US GAAPNo exchangeabilityEstimate under IFRSTax Bakers
Key facts at a glance, as set out in this guide.

What do IAS 21 and ASC 830 have in common?

Both determine a functional currency for each entity in a group, record transactions at the spot rate on the transaction date, remeasure monetary items such as receivables and loans at the closing rate with differences in profit or loss, and keep nonmonetary items such as inventory and equipment at historical rates. Both translate a foreign operation's statements into the group's currency at the closing rate for the balance sheet and the transaction or average rate for income, with exchange differences in other comprehensive income, and release them to profit or loss when the operation is sold or liquidated. Exchange differences on a long-term intragroup loan that forms part of the net investment go to other comprehensive income in the consolidated statements under both. See IAS 21 foreign currency.

IAS 21 vs ASC 830: what are the differences?

IAS 21 vs ASC 830 at a glanceIAS 21 vs ASC 830 at a glanceTOPICIFRSUS GAAPRanked functional currency factorsRequiredNot requiredBright-line 100% inflation testNot requiredRequiredInflation restatement (IAS 29)RequiredNot allowedEstimate a rate if not exchangeableRequiredNot requiredDeferred tax on remeasured itemsRequiredNot allowed
One model; hyperinflation and exchangeability are where they part.
AreaIAS 21 and IAS 29ASC 830
Functional currencyPrimary indicators, the currency that drives prices and costs, then secondary indicatorsNo hierarchy of indicators
Identifying hyperinflationJudgment, using indicators that include cumulative inflation over three years approaching or exceeding 100%Cumulative inflation of about 100% or more over three years makes an economy highly inflationary
Accounting for an operation in hyperinflationRestate its figures for inflation under IAS 29, then translate everything at the closing rateRemeasure as if the reporting currency were its functional currency, with gains and losses in net income
When hyperinflation accounting startsFrom the beginning of the period in which the economy becomes hyperinflationaryFrom the first day of the next reporting period
Releasing the translation reserveOn disposal or partial disposal, with a policy choice for reductions such as repayments of capitalOnly on a sale or a complete or substantially complete liquidation of the foreign entity, or a change in the parent's ownership
Losing significant influence over a foreign associateThe whole reserve is releasedA proportionate amount is released, and the rest stays in the retained interest
Deferred tax on nonmonetary items remeasured at historical ratesRecognizedNot recognized
Consolidating multi-tier groupsDirect or step-by-step method, as a policyUsually step-by-step
Exchange differences on debt securities at fair value through other comprehensive incomeProfit or lossOther comprehensive income, for available-for-sale securities
A currency that cannot be exchangedSince 2025, estimate the spot rate an orderly transaction would useUse the first rate at which exchanges could later be made, if the lack of exchangeability is temporary

An example: a subsidiary in a hyperinflationary economy

A group's subsidiary buys land for LC 1,000 million when the rate is LC 10 to CU 1. During the year the general price index rises from 100 to 180, an 80% increase, and the currency falls to LC 20 to CU 1. Inflation over the last three years has passed 100%, so the economy is hyperinflationary under both frameworks. Figures are in millions. The foreign currency translation model (Excel) includes this hyperinflation comparison.

Land at the year endIFRS: IAS 29 then IAS 21US GAAP: ASC 830 remeasurement
In local currencyLC 1,800, restated by 180/100Not restated
Rate usedClosing rate, LC 20Historical rate, LC 10
In the group's currencyCU 90CU 100
Cash of LC 500 million, a monetary itemCU 25, at the closing rateCU 25, at the closing rate

Restating for inflation and then translating at the closing rate gives the same answer as keeping the historical rate only when the currency's fall matches inflation. Here the currency halved in value while prices rose by 80%, so the IFRS figure is CU 10 million lower. The monetary item is the same under both, but the loss on holding it is reported differently: as a loss on the net monetary position under IAS 29 and as a remeasurement loss under ASC 830. Under IFRS, the comparatives of a group presenting in a stable currency are not restated for the inflation; under US GAAP, the change to highly inflationary accounting is prospective.

What has changed in IAS 21 recently?

Amendments effective from 2025 tell companies how to assess whether a currency is exchangeable and, if not, how to estimate the spot rate and what to disclose. Amendments issued in November 2025, effective from 2027, set how a company with a stable functional currency translates into a hyperinflationary presentation currency. ASC 830 has no equivalent of either. See IAS 21 lack of exchangeability and foreign exchange differences under IFRS 18.

Where to go next

See IFRS vs US GAAP key differences, IFRS 9 vs ASC 815 hedge accounting, which covers hedges of net investments, and functional currency in shipping.

Keep going

Our free Excel models work through the examples in these guides, and the comparisons show where IFRS and US GAAP part ways. Every guide names the Chartered Accountant who wrote it and the one who reviewed it.

All IFRS vs US GAAP guides Free Excel models

Questions people ask

What is the difference between IAS 21 and ASC 830?

The model is the same; the main differences are hyperinflation, where IFRS restates and then translates while US GAAP remeasures into the reporting currency, the hierarchy of functional currency indicators, the release of the translation reserve and the treatment of currencies that cannot be exchanged.

When is an economy highly inflationary under US GAAP?

When cumulative inflation over three years is about 100% or more; IFRS uses judgment based on indicators that include the same three-year measure.

How is a subsidiary in a hyperinflationary economy accounted for?

Under IFRS, its figures are restated for inflation under IAS 29 and translated at the closing rate. Under US GAAP, it is remeasured as if the parent's reporting currency were its functional currency, with gains and losses in net income.

When is the cumulative translation adjustment released?

Under IFRS, on disposal or partial disposal of a foreign operation. Under US GAAP, only on a sale or a complete or substantially complete liquidation of the foreign entity, or a change in the parent's ownership interest.

Sources

The standards, updates and other documents this guide draws on.

  1. IFRS Foundation: IAS 21 The Effects of Changes in Foreign Exchange Rates
  2. IFRS Foundation: IAS 29 Financial Reporting in Hyperinflationary Economies
  3. FASB Accounting Standards Codification: Topic 830, Foreign Currency Matters
  4. Deloitte DART: Foreign currency roadmap, Chapter 10, key differences between US GAAP and IFRS
  5. Grant Thornton: IASB issues amendments to IAS 21 for translation to a hyperinflationary presentation currency, December 2025

Rules and fees change. If you are reading this long after October 26, 2026, confirm the figures with the source before you rely on them.

IAS 21IAS 21 foreign currency: transactions and translationIAS 21Lack of exchangeability: the 2023 IAS 21 amendmentsAccounting standardsIFRS vs US GAAP: the key differences in one guide

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This guide is general information. It is not tax or legal advice for your situation.