Accoridng to the FASB, The assets, liabilities and operations of a foreign entity shall be measured...

Accoridng to the FASB, The assets, liabilities and operations of a foreign entity shall be measured using the functional currency of that entity. Should firms use a single functional currency to measure international operations? What are the benefits and problems with this? Argue for both sides

Expert Solution

The functional currency is the reporting currency of the entity where such entity is headquartered. I believe the firms can use a single functional currency to measure internation operations. However, records must be kept in different currencies for required reportings. The benefits and problem s associated with this are discussed below:

Benefit:

1. Nowadays the business is expanded over multiple countries and hence trnsactions happen in multiple currencies. Hence it gets really difficult unless one single functional currency is followed.

2. Ease of operation

3. Single FASB provision for all organisations.

Problems:

1. Reporting in different currencies not available. There are multiple audits and reporting requirements in place in different countries and the transaction information in multiple currencies might not be readily available.

2. Further work required to convert statements into other currencies.

ekkarill92 answered 2 years ago

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Accoridng to the FASB, The assets, liabilities and operations of a foreign entity shall be measured...

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