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Future Ltd. sells energy drinks worldwide; sales are denominated in USD 'for convenience and consistency' but the sales prices are NOT actually influenced by USD; almost all costs (labour, materials) are in local L$; financing is in L$. Functional currency?
AUSD because sales are USD-denominated
BUSD because >90% of revenue is from this product
CL$ — the currency that mainly influences the COST of producing the energy drink is L$; USD denomination of sales prices is only convenience, not economic influence
DCurrency of the country where Future Ltd. is incorporated
Answer & Solution
Correct answer: C. L$ — the currency that mainly influences the COST of producing the energy drink is L$; USD denomination of sales prices is only convenience, not economic influence
Ind AS 21 prioritises the currency that economically INFLUENCES prices, not the currency of denomination. Where USD denomination is purely operational/convenience and L$ drives costs, L$ is the functional currency.
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