Functional currency
In accounting, functional currency means the currency of the primary economic environment in which the entity generates and spends cash — a judgment from cash-flow, sales-price, expense and financing indicators.
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This definition follows ASC 830-10-45.
Every citation in this system, with the text we read and the date we checked it, is in US GAAP and where these rules come from.
What it is not called
Each of these is a real word for a different thing. Using it here is what makes a product read as though it was built by someone who has not done the work.
- local currency
Nearby in the catalog
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Terms this one depends on
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Work with this concept
The calculators that compute it and the ledger payloads that carry it. A definition is where a reader starts; these are where they go next.
- FX conversion & gain/lossThe rate is the one in your policy, so you type it. No live rate, no network call, no stale surprise.Tool
- Functional currency vs presentation currencyFunctional currency is the currency of the economic environment an entity operates in, in which its books are kept; presentation currency is the currency its financial statements are reported in — they differ when a group consolidates foreign subsidiaries.Compare
- Journal entry for a realized foreign exchange gain or lossBook a foreign-currency invoice at the rate on the invoice date. When it is collected at a different rate, debit Cash for the dollars received, credit Accounts receivable for the dollars originally booked, and book the difference as a realized foreign exchange gain or loss.Entry
- Journal entry for an unrealized FX revaluationAt each month-end, remeasure open foreign-currency receivables and payables at the closing rate: debit the receivable and credit Foreign exchange gain when the dollar value has risen, or the reverse for a loss. The gain is unrealized until the item settles.Entry
Defined in Lexicon. This page is generated from that document, so the two cannot disagree.