According to AASB 121 The Effects of Changes in Foreign Exchange Rates, the currency of the primary economic environment in which the foreign entity operates is the:
A) local currency.
B) foreign currency.
C) functional currency.
D) presentation currency.

Question

Quizplus · Accepted Answer

The functional currency is defined as the currency of the primary economic environment in which the entity operates, which is used to measure its financial performance and conduct day-to-day operations. AASB 121 requires entities to determine their functional currency based on a variety of factors, including the physical location of their operations, the currency in which sales prices are denominated, and the currency in which funds are sourced for operations. The local currency is usually the same as the functional currency when the entity operates in a single economic environment. The foreign currency refers to any currency other than the functional currency. The presentation currency is the currency in which an entity's financial statements are presented, which may or may not be the same as the functional currency.

According to AASB 121 the Effects of Changes in Foreign