Mixed indicators and judgement

Learning objectives

• Support, through documented judgement, the functional currency when the indicators are mixed (no threshold is prescribed).L3, L4

Normative references

• IAS 21 §12Mixed indicators and functional currency not obvious: management uses its judgement to determine the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions; priority is given to the primary indicators.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

1 question

• The Ostrel group sells in dollars to American customers, but incurs most of its costs in euros and is financed in euros. The indicators are mixed and the functional currency is not obvious. Write a note to management that concludes on the functional currency and justifies the approach, separating case facts, rule and judgement.L4