According to AASB 121 The Effects of Changes in Foreign Exchange Rates, the currency in which an entity primarily generates and expends cash is considered to be the:
A) economic currency;
B) domestic currency;
C) presentation currency;
D) functional currency.

Question

Quizplus · Accepted Answer

According to AASB 121, the functional currency is the currency of the primary economic environment in which the entity operates. In this case, since Sing Sing operates mainly in Australia, its functional currency is Australian dollars.

Answer: B
 The carrying amount of Sing Sing at the date of acquisition in the consolidated financial statements of Aussie Ltd should be translated into Aussie Ltd's reporting currency (which is Australian dollars) using the exchange rate at the date of acquisition. Aussie Ltd should then translate the carrying amount of Sing Sing's net assets at the end of each reporting period into its own reporting currency, using the exchange rate at that reporting period end.

According to AASB 121 the Effects of Changes in Foreign