Home › CA Final › financialreporting › Ind AS 21 — Foreign Currency Transactions: Functional Currency Determination, Scope, Definitions › Under Ind AS 21, 'FUNCTIONAL CURRENCY' is:
Under Ind AS 21, 'FUNCTIONAL CURRENCY' is:
AThe currency in which the parent reports
BThe currency of the PRIMARY ECONOMIC ENVIRONMENT in which the entity operates — normally the currency in which it primarily generates and expends cash
CThe currency in which financial statements are presented
DThe currency of the country in which the entity is incorporated
Answer & Solution
Correct answer: B. The currency of the PRIMARY ECONOMIC ENVIRONMENT in which the entity operates — normally the currency in which it primarily generates and expends cash
Functional currency follows the primary economic environment, not legal incorporation or presentation choice. It is often the currency of the country where the entity operates but not necessarily — depends on cash generation/expenditure.
Related questions
Long-term foreign-currency monetary items for which Ind AS 101 first-time-adoption EXEMPTIUnder Ind AS 21, MONETARY ITEMS are:An entity changes its FUNCTIONAL CURRENCY because the primary economic environment has subAn entity is undecided between two possible functional currencies. Per Ind AS 21, the secoIdentify the statement about functional vs presentation currency under Ind AS 21 that is IAdditional factors specific to a FOREIGN OPERATION (subsidiary, branch, associate, JV) in When the indicators are MIXED and functional currency is not obvious, Ind AS 21 requires mUnder Ind AS 21, the PRIMARY indicators for functional currency are: