AASB 121 The Effects of Changes in Foreign Exchange Rates 9-14: Determine the functional currency: give priority to the currencies that drive selling prices and costs, use financing and receipts currencies as supporting evidence, apply the extra autonomy tests to foreign operations, use judgment when indicators conflict, and change it only when underlying conditions change

What does 9-14 require?

Each entity identifies the currency of the main economic environment in which it earns and spends cash. The primary indicators are the currency that chiefly shapes its selling prices (often the one prices are set and settled in), the currency of the country whose competition and regulation mainly fix those prices, and the currency that chiefly drives labour, materials and other costs. Secondary evidence is the currency in which financing is raised and in which operating receipts are kept. For a foreign operation, the entity also weighs whether it simply carries on the reporting entity's business for it or runs with real autonomy, how much of its activity is with the reporting entity, whether its cash flows directly affect and can readily be remitted to the reporting entity, and whether it can service its debts without support. Where indicators point different ways, management chooses the currency that most faithfully reflects the economics, looking first at the primary indicators. Once set, the functional currency stays unless the underlying transactions, events and conditions change; a hyperinflationary functional currency triggers restatement under AASB 129, which cannot be avoided by choosing another currency.