Under FAS 52, the AOCI-Cumulative Translation Adjustment account is closed out and reported in earnings when the foreign unit is sold or liquidated.

Question

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Under FAS 52 (ASC 830, Foreign Currency Matters), the Accumulated Other Comprehensive Income (AOCI) related to Cumulative Translation Adjustments (CTA) is required to be reclassified from equity to earnings at the time a foreign entity is sold, substantially liquidated, or upon loss of a controlling financial interest in that foreign entity. This process ensures that the cumulative currency translation effects are recognized in the income statement upon the derecognition of the foreign operation.

Under FAS 52, the AOCI-Cumulative Translation Adjustment Account Is Closed