Under IAS 21, the ____________ currency is the primary currency of the entity's operating environment. The...

Under IAS 21, the ____________ currency is the primary currency of the entity's operating environment. The ___________ currency is the currency in which the entity presents its financial statements.

Multiple Choice

a) denominated; recording
b) functional; presentation
c) presentation; functional
d) reporting; local

Solutions

Expert Solution

Answer is b) functional ; presentation

As per International Accounting standard 21 functional currency is the currency of primary economic environment in which the entity operates. Following factors to be considered in determining the functional currency:

1. Currency which mainly affects the prices at which the goods or services are sold.

2. Currency in which the funds are usually generated .

3. Currency in which the receipts from operating activities are retained.

4. Currency, which affects the costs and expenses of the entity.

5. Currency of the country whose regulations, market conditions and competitive forces mainly affects the pricing policy of the entity.

Presentation currency is the currency in which the financial statements are prepared.

Usually financial statements are presented in functional currency. Hence functional and presentation currency are same. If both differ, then financial statements should be translated to presentation currency.

Thanks,

Let me know if you have any doubts.

ekkarill92 answered 1 year ago

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