monetary and nonmonetary items

ASC 255-10 governs supplementary disclosure of the effects of changing prices (inflation) on financial statements. Business entities reporting in U.S. dollars under GAAP are *encouraged but not required* to disclose a five-year summary of current cost-constant purchasing power data — including income from continuing operations on a current cost basis, purchasing power gain or loss on net monetary items, and the inflation-adjusted change in the current cost of inventory and PP&E. The Subtopic also supplies the measurement rules for current cost and lower recoverable amount, the CPI-U restatement mechanics, the translate-restate vs. restate-translate methods for foreign functional currency operations, and guidance on classifying balance sheet items as monetary or nonmonetary.

ASC 830-10 sets the scope and foundational framework for foreign currency accounting: it requires each foreign entity's assets, liabilities, and operations to be measured in that entity's functional currency—the currency of the primary economic environment in which it operates (830-10-45-2)—before amounts are translated into the reporting currency. It supplies the economic indicators (cash flow, sales price, sales market, expense, financing, and intra-entity indicators in 830-10-55-5) that management weighs to identify the functional currency, mandates remeasurement of books of record not kept in the functional currency using historical rates for specified nonmonetary items (830-10-45-17 through 45-18), and requires entities in highly inflationary economies (cumulative 3-year inflation ≈100% or more) to be remeasured as if the reporting currency were the functional currency (830-10-45-11).