Foreign currency refers to the currency of another country, which is not used in the preparation of an organization’s domestic accounts. This term is important in financial reporting for organizations with international transactions or operations.
The currency of the immediate economic environment in which an entity operates, i.e. the one in which it earns and spends cash and which chiefly determines its costs and prices. This will sometimes differ from the currency in which its accounts are presented (the presentation currency), especially where the entity is part of a multinational group.
The currency in which the financial statements of an entity are presented, which can differ from the functional currency, especially in multinational groups with subsidiaries in different countries. It often requires a common presentation currency for consolidated financial statements.
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