The Functional Currency

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Functional Currency There are some major differences between IFRS and US GAAP concerning use of the functional currency in the financial statement presentation. While some of the measures are similar between the two, some are very different. Although, under IFRS, some state they are just similar to GAAP. For 2009, under IFRS, the functional currency would be US dollars because, "greater emphasis is placed on the currency of the economy that influences sales prices for goods and services." (Epstein, 2010) Because 80% of the total sales revenue was US sales, the US would be the economy with the greater influence on the prices of the goods and services. The choice of reporting or presentation other than functional currency translates assets and liabilities at the balance sheet date exchange rate, income and expense at the rate at dates of transaction, or average for the period, if not materially different. (Epstein, 2010) Because it is US dollars, the balance sheet accounts would be translated to US dollars at the balance sheet date. This would bring gains and losses in translating the account totals that could be charged as expense or added to the cost of the sales when the related liabilities cannot be settled and there is no practical means to hedge. The translation of the equity accounts are not specified under IFRS. For 2010, under US GAAP, "the selection of functional currency is open to judgment, but in practice, there is greater emphasis on cash flows than on
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