DipIFR Syllabus B. Elements of financial statements - Foreign currency - extras - Notes ^{2 / 2}

Functional Currency

Every entity has its own functional currency and measures its results in that currency

It is the one that:

If functional currency changes then all items are translated at the exchange rate at the date of change

1. Influences its sales price

2. Is used in the country where most competitors are and where regulations are made

3. Influences labour and material costs

Presentation Currency

An entity can present in any currency it chooses

The foreign sub (with a foreign functional currency) will present normally in its parents presentation currency