# ASC 740-830-05: Income Taxes — Foreign Currency Matters — 05 Overview and Background

Source: FASB Accounting Standards Codification, Basic View

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## ASC 740-830-05: 05 Overview and Background

[Read section](https://asc.understandingaccounting.org/asc/740/830/#05-overview-and-background)

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##### [740-830-05-1](https://asc.understandingaccounting.org/asc/740/830/#740-830-05-1)

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Topic 740 addresses the majority of differences between the financial reporting (or book) basis and tax basis of assets and liabilities (basis differences).

##### [740-830-05-2](https://asc.understandingaccounting.org/asc/740/830/#740-830-05-2)

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This Subtopic addresses the accounting for specific types of basis differences for entities operating in foreign countries. The accounting addressed in this Subtopic is limited to the deferred tax accounting for changes in tax or financial reporting bases due to their restatement under the requirements of tax laws or generally accepted accounting principles (GAAP) in the United States. These changes arise from tax or financial reporting basis changes caused by any of the following:

1.  a
    
    Changes in an entity's [functional currency](https://asc.understandingaccounting.org/glossary/f/#functional-currency "An entity's functional currency is the currency of the primary economic environment in which the entity operates; normally, that is the currency of the environment in which an entity primarily generates and expends cash. (See paragraphs 830-10-45-2830-10-45-3830-10-45-4830-10-45-5830-10-45-6 and 830-10-55-3830-10-55-4830-10-55-5830-10-55-6830-10-55-7.)")
    
2.  b
    
    Price-level related changes
    
3.  c
    
    A [foreign entity](https://asc.understandingaccounting.org/glossary/f/#foreign-entity "An operation (for example, subsidiary, division, branch, joint venture, and so forth) whose financial statements are both: Prepared in a currency other than the reporting currency of the reporting entity Combined or consolidated with or accounted for on the equity basis in the financial statements of the reporting entity.")'s functional currency being different from its [local currency](https://asc.understandingaccounting.org/glossary/l/#local-currency "The currency of a particular country being referred to.").
    

This Subtopic addresses whether these changes, which can affect the amount of basis differences, result in recognition of changes to deferred tax assets or liabilities.