The "functional currency" is:
A)the currency of the primary economic environment in which the entity operates
B)the currency in which the MNC prepares its consolidated financial statements
C)a currency that is not the parent firm's home country currency
D)b and c

Question

Quizplus · Accepted Answer

The functional currency is the currency of the primary economic environment in which the entity operates. It is the currency that best reflects the economic environment in which the entity operates and generates cash flows. It is used for measuring and reporting the financial results of the entity's operations.

Options B and C are not correct. While the parent firm's home country currency may not be the functional currency, the functional currency is not necessarily the currency in which the MNC prepares its consolidated financial statements.

The "Functional Currency" Is