Importance of functional currency?

Importance of functional currency?

What is the importance of functional currency?

The determination of functional currency is extremely important as incorrectly determining the same will affect the financial statements in a big way, causing the transactions in the functional currency to be treated as, though they were foreign currency transactions.

  • Exchange differences will be recognised on transactions for which no foreign exchange difference should have arisen.
  • Similarly, transactions that should have led to recognition of foreign exchange differences, will not be provided for.
  • This may have a significant impact on both the statement of comprehensive income and the statement of financial position.

Ind AS Accounting Standards

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