Definition of 'Functional Currency'
The primary type of money that a company uses in its business activities. Often a company's functional currency is the same as that of the nation in which it is headquartered, though this is not necessarily the case. The functional currency is most relevant for multinational corporations that conduct business in multiple currencies.
For example, a Canadian company with the bulk of its operations in the United States would consider the U.S. dollar its functional currency, even if financial figures on its balance sheet and income statement are expressed in terms of Canadian Dollars.
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