Presentation currency
An entity may present financial statements in a currency different from its functional currency. IAS 21 specifies translation procedures: for a foreign operation whose functional currency is not hyperinflationary, assets and liabilities are generally translated at the closing rate and income and expenses at transaction-date rates, with resulting translation differences generally recognised in other comprehensive income. Additional requirements apply for hyperinflationary currencies and disposal.
Worked example
A subsidiary operates with the euro as its functional currency, while its parent presents consolidated statements in dollars. The subsidiary’s results are translated into dollars for consolidation under IAS 21.
Common mistake
Assuming functional and presentation currencies must always be the same or translating every income and expense item at the closing rate.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |