Issued by the Committee on Accounting Procedure, American Institute of Accountants,
13 East 41st Street, New York, N. Y. Copyright 1939 by American Institute of Accountants
Foreign Operations and
PURSUANT to a resolution of the executive committee adopted at a
meeting held October 19, 1939, the committee on accounting pro-cedure and the research staff have considered the question of treatment of foreign business operations of United States corporations in view of the present disturbed conditions.
Since it was necessary that the statement on the question should be issued promptly the committee has restricted its consideration to the questions most immediately at issue. It still has under consideration a number of related questions, such as treatment of valuation reserves in general.
The committee and the research department have carefully exam-ined the available literature, including memoranda issued by a special committee of the Institute in 1931 and 1933 (which seem to call for no substantial modification), and have discussed the subject with accountants and others actively engaged in practice in which such questions frequently arise. A statement by the committee is accord-ingly submitted.
For convenient reference the statements of 1931 and 1933 are re-printed at the end of the present statement.
FOREIGN OPERATIONS AND FOREIGN EXCHANGE Treatment of Earnings and Assets
1. The disturbed conditions abroad, and the uncertain future, make it necessary to reconsider the accounting treatment of assets, liabili-ties, losses, and gains involved in the conduct of foreign business, and included in the financial statements of United States companies.
It is clear that in many cases in which statements of foreign sub-sidiaries have been consolidated with statements of United Stales companies this practice can no longer be followed.
2. While there are comparatively few countries with unrestricted