What is Reporting Currency

Reporting currency is the currency which is used for an entity's financial statements. The reporting currency in financial statements and other financial reports are easiest to understand when they are compiled using only one currency. However, many large companies have operations in many different countries. This often requires doing business with a variety of currencies. When this is the case, the currency of the company's home office or parent company where the financial statements are prepared is considered the reporting currency. Other satellite locations or subsidiaries that use different currencies in their day-to-day functioning must convert their financial statements into the reporting currency so the statements can be consolidated. This is accomplished using either the temporal or current rate method of conversion.

BREAKING DOWN Reporting Currency

To compile financial reports for multicurrency firms, accountants must convert foreign currencies into a single reporting currency at the current exchange rate. To standardize this process, there are a variety of accounting regulations which prescribe a uniform methodology for carrying out this conversion. This helps to maximize the transparency with which these financial reports are presented.