Toiminantavaluutan

Toiminantavaluutta, often translated as "functional currency" or "transaction currency," refers to the primary currency in which a company conducts its day-to-day business operations. This is the currency used for most sales, purchases, and other transactions. When a company operates in multiple countries, it may have a functional currency for its parent company and potentially different functional currencies for its foreign subsidiaries, depending on the economic environment in which each subsidiary operates.

The determination of a company's functional currency is crucial for accounting and financial reporting purposes, particularly under International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP). It influences how transactions are recorded, how financial statements are translated when reporting in a different presentation currency, and how gains or losses from foreign currency exchange are recognized.

Factors considered when identifying the functional currency include the currency that mainly influences sales prices, the currency of the country whose prices for goods and services seem to compete most directly, and the currency in which funds from financing activities are generated. The chosen functional currency should accurately reflect the economic reality of the company's operations and the flow of its cash. If a company's operations change significantly, its functional currency may need to be reassessed.