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Foreign currency - Coggle Diagram
Functional currency
Primary factors
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Currency that influences labour, materials & other costs
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Example
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Although Maior sometimes imports & sells its parent's products: this is only a small part of its business activity
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Some transactions are undertaken with China, but these are relatively small
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Therefore, the yen is the functional currency of Maior & the entity doesn't need to consider the secondary factors.
Maior operates with autonomy, so its currency must be assessed separately from its parent
Ex:1
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Receivables needs to be reduced to $1m (3m dinar / 3)& foreign exchange loss of $0.2m ($1.2m-$1m) recorded in SPL:
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Ex 2:
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The purchase of Intangible asset would be translated using the spot rate and recorded at $5m (10m dinar / 2)
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