What is the difference between presentation currency and functional currency?

Presentation currency refers to the currency that the parent company uses to prepare its financial statements. Mostly, a company’s reporting currency is the currency of the country where the company is located. 2. Functional Currency It is the currency of the primary economic environment in which an entity operates.

What is the difference between reporting currency and reporting currency?

Most often the currency used is the currency of the country in which the parent company is legally registered. The reporting currency is the currency in which a company will report its financial statements. A reporting currency must be one currency, which makes it easier to understand and follow financial documents.

What if a financial statement is not a functional currency?

An entity sometimes presents its financial statements or other financial information in a currency that is not its functional currency without meeting the requirements of paragraph 55. For example, an entity may convert into another currency only selected items from its financial statements.

How do you determine the functional currency of a foreign operation?

When determining the functional currency of an entity’s foreign operations, consider the following factors: Whether the operation is essentially an extension of the reporting entity, or it can operate with a significant degree of autonomy. The functional currency is the reporting entity’s in the first case, and the local currency in the later.