What is the difference between functional currency and presentation currency?

IAS21 definebs functional currency as the currebcy of the primary economic environment in which the entity operates. -Presentation currency is the currency in which the financial statements are oresebted. -A function currency is determined by looking at a number of relevant factors.Thus currency should be rhe currebcy in which an etity usually generates and spends cash. -It should be the one in which the business transcations of sny entity are normally denominated

 Functional Currency -  The currency of the primary economic environment in which the entity operates.

Presentation Currency - The currency in which the financial statements are presented.

If the presentation currency differs from the currency of the functional entity, the entity shall translate its results and its financial position to the presentation currency. For example, when a group contains individual enterprises with different functional currencies, the results and financial position of each entity are expressed in a common currency so that the consolidated financial statements can be presented. An entity is required to translate its financial position and its financial position from its functional currency into the presentation currency (s) using the method required to translate a foreign operation for inclusion in the financial statements of the reporting entity.

 

A functional currency is the currency used in the main economic environment in which an enterprise operates and in which the enterprise generates and spends money. Key factors when determining the functional currency of an entity: - The currency that mainly affects the selling prices - usually the currency that is named and the settlement of prices based on it -- The currency of the country in which competition and regulations affect mainly sales prices- The currency that mainly affects labor costs and other commodity costs is the currency for which the price is designated and settled. - The functional currency is the currency of the reporting institution if the ratio is high and the local currency if it is low as well as the impact of conversion and debt service if it is high is the functional currency.