What is the functional currency of Company IOU?

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Multiple Choice

What is the functional currency of Company IOU?

Explanation:
Functional currency is the currency of the primary economic environment in which a company operates—the currency that mainly drives its sales, costs, and cash flows. For Company IOU, its day-to-day transactions, invoicing, payroll, supplier payments, and financing are conducted in Swiss francs, and the business activity is centered in Switzerland. Because these core operations, and the resulting financial results, are denominated in CHF, CHF best represents the currency that drives IOU’s economic reality. The other currencies would only be correct if IOU’s primary activities were dominated by those currencies; since they are not, CHF is the functional currency.

Functional currency is the currency of the primary economic environment in which a company operates—the currency that mainly drives its sales, costs, and cash flows. For Company IOU, its day-to-day transactions, invoicing, payroll, supplier payments, and financing are conducted in Swiss francs, and the business activity is centered in Switzerland. Because these core operations, and the resulting financial results, are denominated in CHF, CHF best represents the currency that drives IOU’s economic reality. The other currencies would only be correct if IOU’s primary activities were dominated by those currencies; since they are not, CHF is the functional currency.

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